Inland Waterways: Recent Proposals and
Issues for Congress
Charles V. Stern
Specialist in Natural Resources Policy
May 3, 2013
Congressional Research Service
7-5700
www.crs.gov
R41430
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Inland Waterways: Recent Proposals and Issues For Congress

Summary
Inland waterways are a significant part of the nation’s transportation system. Because of the
national economic benefits of maritime transport, the federal government has invested in
navigation infrastructure for two centuries. Commercial barge shippers and other waterway users
receive significant support through federal funding for operational costs, capital expenditures, and
major rehabilitation on inland waterways. Since the Water Resources Development Act of 1986,
expenditures for construction and major rehabilitation projects on inland waterways have been
cost-shared on a 50/50 basis between the federal government and commercial users through the
Inland Waterways Trust Fund (IWTF). Operations and maintenance costs for inland waterways
(which typically exceed construction and major rehabilitation costs) are a 100% federal
responsibility.
Future financing for the inland waterway system is uncertain. The IWTF is supported by a $0.20
per gallon tax on commercial barge fuel, but its balance has declined significantly since 2005 due
to a combination of increased appropriations, cost overruns, and decreased revenues. Without
changes to the current financing system, IWTF spending is likely to be limited.
The Obama Administration recommends replacing the fuel tax with user fees that would increase
revenues and potentially allow for more spending on inland waterways projects. It submitted
proposals to raise inland waterways user fees in budget requests and deficit reduction proposals in
FY2010, FY2011, FY2012, FY2013, and FY2014. Congress and industry interests have rejected
each of these proposals. In 2010, the Inland Waterways Users Board (IWUB), a federal advisory
committee advising the U.S. Army Corps of Engineers on inland waterways, endorsed an
alternative proposal that is supported by many barge industry interests. The proposal would
increase the fuel tax by $0.06-$0.09 per gallon, but would require the federal government to cover
all project costs for dams and rehabilitation that are currently shared with the IWTF. To date, no
major changes to the inland waterway financing system have been enacted.
The user industry (including the barge industry and agricultural groups) argues that its
recommended changes are necessary to shore up the trust fund, improve deteriorating
infrastructure, and distribute costs equitably among beneficiaries (e.g., more funding for dams by
federal taxpayer beneficiaries). The Obama Administration agrees that infrastructure upgrades are
needed, but argues against shifting these costs to the federal government and instead proposes
higher user fees. Some taxpayer and environmental groups favor increasing nonfederal costs not
just for construction, but also for operation and maintenance expenses that are not cost-shared.
In the 113th Congress, H.R. 1149 would enact most of the aforementioned user proposal,
including a $0.06 increase to the fuel tax. S. 407 would enact many of the same components, but
with a $0.09 increase to the tax and a lower threshold for cost-sharing triggers. S. 601, the Water
Resources Development Act of 2013, would authorize the project delivery recommendations of
that proposal but would make no changes to the fuel tax or cost sharing. The Administration’s
FY2014 budget also proposes a new, unspecified user fee expected for inland waterways. In
considering inland waterways legislation, Congress may consider the appropriate cost share
between the federal government and waterway users for various inland waterways costs, the
appropriate type of user fee to fund the nonfederal share (fuel taxes, lockage fees, etc.), and the
preferred planning process and funding levels for inland waterways.

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Inland Waterways: Recent Proposals and Issues For Congress

Contents
Introduction to U.S. Inland Waterways ............................................................................................ 1
Rationale and Statistics .............................................................................................................. 1
Financing Inland Waterways ..................................................................................................... 4
Previous Legislation: 1978 and 1986 .................................................................................. 4
Inland Waterways Trust Fund: Trends and Issues Since 1986 ......................................................... 6
Other Concerns with IWTF Planning ........................................................................................ 8
Inland Waterway Financing Proposals ............................................................................................. 8
Executive Branch Proposals ...................................................................................................... 8
Bush Administration ............................................................................................................ 9
Obama Administration ........................................................................................................ 9
Inland Waterways Users Board Proposal................................................................................. 11
Increase User Fees ............................................................................................................. 12
Increase the Federal Share of Inland Waterway Costs ...................................................... 12
Increase Overall Spending on Inland Waterways .............................................................. 13
Other Recommendations ................................................................................................... 13
Other Proposals: Increase User Share of Costs ....................................................................... 15
Issues for Congress ........................................................................................................................ 17
Competing Views on Inland Waterway Navigation Investments ............................................ 17
Aging Infrastructure and Urgency of New Investments .................................................... 18
Waterway Traffic Projections ............................................................................................ 18
Environmental Considerations .......................................................................................... 19
Funding for Proposed Investments .......................................................................................... 20
User Fees and Other Revenue Sources.............................................................................. 20
Cost-Sharing ...................................................................................................................... 22
Other Issues with Inland Waterway Planning .......................................................................... 24

Figures
Figure 1. Fuel-Taxed Inland Waterway System ............................................................................... 3
Figure 2. Relative Tonnage on Highways, Railroads, and Inland Waterways, 2002 ....................... 3
Figure 3. Federal Inland Waterway Projects: Financing Trends, FY1987-FY2013 ......................... 7
Figure 4. Inland Waterways Projects: Projected Trends under IWUB Proposal ............................ 14
Figure 5. Fuel Tax Receipts Relative to O&M Expenditures, Ton-Miles ...................................... 16

Tables
Table 1. Fuel Taxes on Inland Waterways........................................................................................ 5
Table 2. Bush Administration Lock User Fee Proposal ................................................................... 9
Table 3. Obama Administration Deficit Reduction Proposal: Inland Waterways Fees.................. 10
Table 4. Comparison of Existing and IWUB-Proposed Cost Shares for Inland Waterway
Construction................................................................................................................................ 12
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Inland Waterways: Recent Proposals and Issues For Congress

Contacts
Author Contact Information........................................................................................................... 25

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Inland Waterways: Recent Proposals and Issues For Congress

Introduction to U.S. Inland Waterways
Inland waterways are a significant component of the nation’s marine transportation system.1
These waterways carry approximately one-sixth of the national volume of intercity cargo on
25,000 miles of commercially active inland and intracoastal waterways.2 Included in this total are
approximately 12,000 miles of fuel-taxed federal waterways known as the Inland Waterway
System (IWS), which are managed by the U.S. Army Corps of Engineers (Corps). These
waterways cover 38 states and handle approximately half of all inland waterway freight (or one-
twelfth of all national freight).3 The Corps develops, operates, and maintains the infrastructure of
these commercial waterways (e.g., navigation channels, harbors, locks, and dams), and also
maintains and regulates the channel depths through dredging and water management.
Costs for maintenance and construction on inland waterways are funded by the Corps (through
appropriations) and the commercial user industry (through user fees paid to the federal
government). The Corps pays for 100% of the cost for studies and for operations and maintenance
on the IWS, while the cost for new construction or major rehabilitation (currently defined as any
upgrade in excess of $8 million) is shared equally between the Corps and the commercial
industry.
Congress is faced with competing proposals relating to future financing for inland waterway
system investments, including who will finance what investments, and at what level. The current
revenue source, a set tax on fuel agreed to in the mid-1980s, is insufficient to cover the
nonfederal costs of major capital expenditures on inland waterways. This has in some years
resulted in federal taxpayers covering more than half of these costs. The ongoing shortfall is
currently limiting the number of new and ongoing inland waterway construction projects, and is
expected to continue to do so unless changes to the financing system are enacted by Congress.
Recent proposals highlight a number of issues associated with inland waterways. On multiple
prior occasions, the executive branch has proposed to phase out the fuel tax in favor of lock usage
fees, but these efforts have been rejected by Congress. More recently, the user industry proposed
and continues to favor a plan that includes increases to the existing fuel tax in combination with
an increase in the overall federal share for inland waterway costs.
Rationale and Statistics
The use of inland waterways for commercial transport predates the founding of the nation itself.
Before the onset of rail and highway transport, inland waterways were a primary means of
transporting many goods. Through the early 1800s, inland waterway development was left to the

1 While harbors maintained by the Corps are a significant part of the U.S. transportation system, the focus of this report
is the inland waterway system. For more information on harbors and the Harbor Maintenance Trust Fund, see CRS
Report R41042, Harbor Maintenance Trust Fund Expenditures, by John Frittelli.
2 Unless noted otherwise, this report uses “inland waterways” as a shorthand for all inland and intracoastal waterways
in the United States (including inland, coastal, and lakewise domestic traffic).
3 CRS analysis based on data derived from the Army Corps of Engineers waterborne commerce statistics (available at
http://www.ndc.iwr.usace.army.mil/wcsc/wcsc.htm), and the Department of Transportation’s Commodity Flow Survey
for 2007 (available at http://www.bts.gov/publications/commodity_flow_survey/final_tables_december_2009/html/
table_01a.html).
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states, until the Supreme Court gave the United States authority over interstate commerce in
1824.4 Shortly thereafter, the federal government began funding and support for waterways to
benefit commerce. Improvements in other forms of transportation (rail and highway) have
decreased overall reliance on inland waterways as a means of commercial freight transportation,
but these waterways remain a significant part of the nation’s transportation mix for many
commodities.
Annually, inland waterway traffic on the federal IWS accounts for 4%-5% of total commercial
tonnage shipped.5 In 2010, commercial shippers on the IWS transported 566 million tons of
commercial goods.6 While in terms of tonnage, inland waterways are a relatively small part of the
nation’s overall freight transportation network, these waterways remain an important
transportation route in some regions of the country, especially those that rely on movement of
bulk goods over long distances. Along with freight rail, inland waterways are a primary means of
transport for the nation’s grain and oilseed exports, and also for raw materials and liquid and bulk
products such as coal, petroleum, chemicals, processed metals, cement, sand, and gravel.
Although previous estimates by the Corps and others projected that inland waterway traffic would
increase, actual traffic on inland waterways has remained somewhat flat over the last 20 years in
terms of both tonnage and ton-miles.7 At the same time, overall freight tonnage for all modes of
domestic freight shipping increased at an average annual rate of 1.2% from 1997 to 2007, and is
expected to continue to increase. The Department of Transportation projects that overall freight
tonnage will double over the next 25 years, with inland waterway traffic projected to increase at a
rate significantly less than that projected for rail and highway shipping.8
The system of fuel-taxed inland and intracoastal waterways is displayed in Figure 1. Inland
waterway tonnage relative to other modes of freight transit is shown in color in Figure 2. As
Figure 2 indicates, almost all of the tonnage (approximately 90%) transported on inland
waterways comes through the Mississippi and Ohio River System, primarily through bulk
shipping on barges.

4 Gibbons v. Ogden, 22 U.S. 1 (1824).
5 Inland waterway totals do not include coastwise or lakewise traffic. The most recent (2007) Department of
Transportation Commodity Flow Survey estimated that all modes of shipping (including truck, rail, water, air, and
pipeline) totaled 12.5 billion tons in 2007.
6 Waterborne Commerce of the United States, Calendar Year 2010, Part 5- National Summaries. Available at
http://www.ndc.iwr.usace.army.mil/wcsc/pdf/wcusnatl10.pdf.
7 For waterway commerce trends since 1991, see U.S. Army Corps of Engineers, Waterborne Commerce Statistics
Center, Waterborne Commerce of the United States, Calendar Year 2010, Part 5- National Summaries, pages 1-11 and
1-12.
8 U.S. Department of Transportation, Freight Analysis Framework: Freight Facts and Figures, 2009,
http://ops.fhwa.dot.gov/freight/freight_analysis/nat_freight_stats/docs/09factsfigures/table2_1.htm.
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Figure 1. Fuel-Taxed Inland Waterway System

Source: Inland Marine Transportation System, Capital Projects Business Model, April 13, 2010.
Figure 2. Relative Tonnage on Highways, Railroads, and Inland Waterways, 2002

Source: U.S. Department of Transportation, Freight Facts and Figures, 2008.
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Inland Waterways: Recent Proposals and Issues For Congress

Financing Inland Waterways
The federal government invests in inland waterways because of the value of the IWS to the
nation. The federal government first began to invest in inland waterways in the early 1800s. Over
time, this gave way to a significant federal investment in the form of full funding for
investigations, operations and maintenance, and construction costs funded through the U.S. Army
Corps of Engineers. However, legislation in the 1970s and 1980s changed this system and created
user cost-sharing requirements for a subset of these costs.
Previous Legislation: 1978 and 1986
Two pieces of legislation transformed inland waterway financing and created the framework for
the current system: the Inland Waterways Revenue Act of 1978 (P.L. 95-502, 26 U.S.C. §9506)
and the Water Resources Development Act (WRDA) of 1986, as amended (P.L. 99-662, 26
U.S.C. §4042). These two laws underpin the current financing system for Corps inland waterway
projects. Prior to these laws, investments had been entirely funded by the federal government as a
result of established policies (see box below). Together, the acts of 1978 and 1986 established a
fuel tax on commercial barges, cost-share requirements for inland waterway projects, and a trust
fund to hold these revenues and fund investments in construction. The overall effect of these
changes was a greater financial and decision-making responsibility for commercial operators on
the inland waterway system.

Inland Waterways Revenue Act of 1978
The Inland Waterways Revenue Act of 1978 was the original law establishing user fee requirements for commercial
waterway shipping, and much of the debate leading up to that bill’s passage is still relevant today.9 For 40 years prior
to passage of this law, successive administrations and congressional sponsors had tried and failed to institute user fees
on barge traffic to increase equity among transportation modes and across various regions of the country. These
efforts failed, primarily because, over time, Congress had developed a strict policy of no user fees on inland
waterways.10
The 1978 bill was revised significantly from earlier versions in the House and Senate. The barge industry initially
opposed any form of tax or user fee on the aforementioned policy basis. Advocates for a user fee, including the bill’s
sponsors, had initially proposed a much higher fee on lock usage (enough to raise approximately $350 million a year
in nonfederal revenues). The sponsors also proposed that user fees be tied to overall expenditures on inland
waterways (i.e., user fees would go up automatical y when expenditures on construction went up).11
In the final version of the legislation, the lock usage fee was replaced with a fuel tax that would generate significantly
less on an annual basis. Additionally, as part of the negotiations between the bill’s sponsors and the waterway
industry, the capital recovery mechanism was replaced with a more indirect tie between revenues and overall
expenditures in the form of a dedicated trust fund. While the trust fund would hold user revenues for the explicit
purpose of inland waterway investments, the fuel tax itself was not tied to expenditures out of the trust fund.

9 Efforts to secure passage of this legislation were the primary subject of series of articles in The Washington Post, as
well as a book on the issue. See T. R. Reid, Congressional Odyssey: The Saga of a Senate Bill (San Francisco, CA:
W.H. Freeman and Company, 1980).
10 This policy dated to the Northwest Ordinance of 1787, in which Congress declared that certain inland waterways
“shall be common highways and forever free ... without any tax, impost, or duty therefore.”
11 For more information on this argument, see the “Funding for Proposed Investments” section of this report.
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The federal policy of taxing fuel on commercial barge traffic was codified in the Inland
Waterways Revenue Act of 1978.12 The act of 1978 also established the Inland Waterways Trust
Fund (IWTF), which was initially funded by this fuel tax ($0.04 per gallon, beginning in FY1980,
gradually increasing to $0.10 per gallon in FY1986), and established those waterways that are
subject to the tax.13 However, no appropriations were authorized from the IWTF until later, in
WRDA 1986.
WRDA 1986 authorized additional increases to the 1978 act’s fuel tax, which were set to rise to
the current level of $0.20 per gallon beginning in 1994.14 (See Table 1 for the full schedule of tax
increases.) Similar to the initial tax under the 1978 act, this tax was not indexed for inflation.
Significantly, WRDA 1986 also laid out a cost-sharing process for inland waterway expenditures:
it stipulated that inland waterway construction projects would be funded on a 50/50 basis, with
50% of the funds required for construction coming from the IWTF and the remaining 50% funded
by the Treasury’s General Revenue (GR) fund.15 On the other hand, operations and maintenance
(O&M) costs were to remain a 100% federal responsibility.
Table 1. Fuel Taxes on Inland Waterways
(taxes under 1978 and 1986 acts)
Datea
Tax per Gallon
October 1, 1980-September 30, 1981
$0.04
October 1, 1981-September 30, 1983
$0.06
October 1, 1983-September 30, 1985
$0.08
October 1, 1985-December 31, 1989
$0.10
1990 $0.11
1991 $0.13
1992 $0.15
1993 $0.17
1994 $0.19
After 1994
$0.20
Source: Inland Waterways Revenue Act of 1978 (P.L. 95-502) and WRDA 1986 (P.L. 99-662).
a. Tax levels preceding 1990 were set in P.L. 95-502 and were adjusted based on fiscal years, while post-1990
levels were set in P.L. 99-662 and were based on calendar years.
Under WRDA 1986, expenditures from the IWTF on a construction project are not automatic.
They must be first authorized by Congress and then funded in annual discretionary
appropriations. WRDA 1986 authorized an initial round of projects to be funded by the IWTF,

12 See box, “Inland Waterway Revenue Act of 1978.” While the IWTF first received revenues in 1980, Congress did
not authorize appropriations from the fund before WRDA 1986. The fund initially had a balance of $260 million before
any other appropriations were made.
13 A list of waterways currently subject to the fuel tax is available through the Federal Register (26 C.F.R. §4042,
Subpart G).
14 33 U.S.C. §201. The tax was gradually increased from $0.10 per gallon in FY1986 to $0.20 cents per gallon after
1994. This tax has stayed at $0.20 cents per gallon since 1994, and is not indexed for inflation.
15 26 U.S.C. §9506 (C)(2).
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and subsequent Water Resources Development Acts passed by Congress have authorized
additional projects. Pursuant to the WRDA requirements, appropriations for these projects have
been made by Congress in annual appropriations bills (see next section, “Inland Waterways Trust
Fund: Trends and Issues Since 1986,” for additional information on funding trends).
As previously mentioned, WRDA 1986 retained the policy of 100% federal funding for inland
waterway costs besides construction and major maintenance (i.e., expenditures for studies and
operations and maintenance costs less than $8 million).16 While not technically part of the IWTF,
the amount of federal dollars spent on O&M typically exceeds the amount spent on construction
and major rehabilitation by a significant amount, and is often part of policy discussions related to
inland waterways.17
WRDA 1986 also established the Inland Waterways Users Board (IWUB), a federal advisory
committee subject to the Federal Advisory Committees Act.18 Section 302 of WRDA 1986
stipulates that the board be made up of 11 members representing shipping interests on the primary
geographical areas served by inland waterways, with due consideration given to tonnage shipped
on the respective waterways.19 The board was established to give commercial users an
opportunity to inform the priorities for federal decision-making on IWTF projects. It meets
regularly three times a year to develop and make recommendations to the Secretary of the Army
and Congress regarding these investments.20
Inland Waterways Trust Fund:
Trends and Issues Since 1986
Between 1986 and 2011, the IWTF balance has varied considerably. Beginning in 1992, balances
increased, reaching their highest level, $413 million, in 2002. On multiple occasions, the
executive branch (through the Clinton Administration in 1996 and the Bush Administration in
2004) proposed to further increase fees on the user industry and require the IWTF to also fund
some portion of operations and maintenance expenditures (in addition to the construction and
major rehabilitation requirements). These proposals were not enacted by Congress.
Beginning in FY2005, appropriations from the IWTF increased significantly as the Bush
Administration requested and Congress appropriated greater investments in IWTF-funded
projects. These increasing expenditures significantly exceeded annual fuel tax collections going
into the IWTF and interest on the IWTF balance.21 (See Figure 3.) Additionally, some projects
significantly exceeded their original cost estimates, further stressing the trust fund.22 As a result,
balances fell sharply from 2005 to 2010.

16 33 U.S.C. §2212
17 In recent years, O&M costs on inland waterways have averaged more than $500 million annually.
18 5 U.S.C., Appendix §2.
19 P.L. 99-662, §302. A map of geographical areas and additional information about current representatives is available
at http://waterwaysusers.us/BoardMembers.htm.
20 The board is composed of 11 members selected by the Secretary of the Army, and typically meets three times a year
to develop and make recommendations to the Secretary regarding construction and rehabilitation priorities and
spending levels. Recommendations by the IWUB are transmitted to Congress in an annual report.
21 For instance, in FY2007 $171 million was spent from the IWTF, while only $88 million in tax revenues were
received. The increased investment in inland waterway projects was endorsed by the IWUB.
22 A 2008 report by the Corps studied this issue at several locations. See U.S. Army Corps of Engineers, Great Lakes
(continued...)
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In an effort to reduce stress on the IWTF and prevent the balance from falling to unsustainable
levels, Congress has taken a number of “stopgap” measures in previous years. For instance,
Congress exempted major rehabilitation projects from their usual cost-sharing requirements in the
continuing resolution for FY2009 (P.L. 110-329) and limited the projects with access to the IWTF
in regular appropriations for FY2009 (P.L. 111-8). Congress also provided inland waterway
projects with more than $400 million in construction funding under the American Recovery and
Reinvestment Act (ARRA, P.L. 111-5), and exempted this funding from IWTF cost-share
requirements. These measures limited the costs to the IWTF for ongoing projects, while also
allowing for the completion of these projects. More recently, Congress prohibited the Corps from
entering into entering into new contracts requiring IWTF funding since FY2009, and has limited
enacted appropriations from the IWTF to expected fuel tax revenues for the coming year. Due to
in part to these stopgap measures, the trust fund balance appears to have stabilized. A summary of
these trends is provided in Figure 3.
Figure 3. Federal Inland Waterway Projects: Financing Trends, FY1987-FY2013

Source: Army Corps of Engineers Data, adapted by CRS.
Notes: Funding amounts are in nominal dol ars and represent funding for construction only. Federal spending
for FY2009 and FY2010 reflects congressional “stopgap” measures and supplemental funding under ARRA (P.L.
111-5).


(...continued)
and Ohio River Division, Inland Navigation Construction, Selected Case Studies, U.S. Army Corps of Engineers,
White Paper, July 17, 2008.
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Without changes to IWTF financing, funding for new projects is expected to be extremely limited
in the foreseeable future, with most of the funding expected to go to one project, Olmsted Lock
and Dam.23 Such a scenario would likely increase the current project backlog for Corps inland
waterway projects. Long-term options and proposals to address this situation are discussed in the
section below, “Inland Waterway Financing Proposals.”
Other Concerns with IWTF Planning
In addition to problems with the IWTF financing system, other concerns have been raised in
recent years. Specifically, fuel-tax payers (represented by the IWUB) have registered complaints
related to structural inefficiencies and inequities in the Corps project planning process for inland
waterways investments. Many users note that in the past, decisions within the executive branch
have led to what some consider inefficient project implementation and use of tax dollars (in the
form of cost escalation and schedule delays on some IWTF projects). As a partial response to
these concerns, in FY2006 the Corps implemented several reforms to its project delivery process,
including implementation of risk-based cost estimates and prioritized funding for projects with a
high risk of cost overruns. While the IWUB generally recognized these changes as improvements,
many continue to advocate for additional structural reforms to the planning process (see below
section, “Inland Waterways Users Board Proposal”), and highlight the most recent round of cost
overruns at Olmsted Lock and Dam as evidencing the ongoing need for these reforms.24
Inland Waterway Financing Proposals
Concerns related to the solvency of the IWTF and the equity of the financing system for fuel-
taxed inland waterways have led to a number of recent proposals, first by the Bush
Administration in 2008, then by the Obama Administration in 2009 and 2010. While these
proposals were rejected by Congress, the Administration has recently presented Congress with a
new recommendation that would raise revenues for the IWTF. The user industry, represented by
the IWUB, recently adopted its own proposal, which differs significantly from the
Administration’s proposal. The user proposal would implement an increase to the current fuel tax,
while also requiring an increased federal share for some inland waterway investments (e.g.,
dams).
Executive Branch Proposals
Past Administrations, including both the Bush and Obama Administrations, have submitted
various proposals to increase commercial user fees on inland waterways. The most recent of these
proposals are discussed below.

23 According to the Corps, the majority of IWTF appropriations are expected to go to the Olmsted Lock and Dam
Project on the Ohio River for the foreseeable future. Project cost increases for Olmsted were recently increased by
approximately $1 billion, and the total cost for the project was estimated at $3.01 billion as of 2012. In enacted
appropriations for FY2012, almost all IWTF spending ($74 million) was for the Olmsted project.
24 See footnote 23.
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Bush Administration
In response to concerns regarding a potential IWTF shortfall, the Bush Administration in 2008
submitted a legislative proposal to Congress that would have instituted a lock usage fee to replace
the fuel tax and generate additional revenue for the IWTF beginning in FY2009.25 The fee
proposed to phase in charges to commercial barges of $50-$80 per lockage through the end of
calendar year 2012 for lock chambers greater than 600 feet in length, and $30-$48 for chambers
less than 600 feet. (See Table 2.) Additionally, it proposed to tie IWTF balances to this user fee
after the end of 2012 by raising lockage fees when the IWTF balance fell below $25 million, and
lowering fees when the balance rose above $75 million.26
Table 2. Bush Administration Lock User Fee Proposal
Fee for Locks Greater than 600
Fee for Locks Less than 600 Feet
Date
Feet in Length
in Length
Oct 1 2008-Sept 30 2009
$50 per barge
$30 per barge
Oct 1 2009-Sept 30 2010
$60 per barge
$36 per barge
Oct 1 2010-Sept 30 2011
$70 per barge
$42 per barge
Oct 1 2011 Dec 31, 2012
$80 per barge
$48 per barge
After Dec 31, 2012
As provided for in legislationa
As provided for in legislationa
Source: Legislative proposal by the Department of the Army, Office of the Assistant Secretary for Civil Works,
April 4, 2008.
a. Pursuant to subsection 2(b) of the proposed legislation, if the balance of the IWTF fel below $25 mil ion,
then the fee for lockages would have automatically increased from the 2012 levels ($10 more per lockage
for large locks, $6 more per lockage for small locks). Similarly, if the balance of the IWTF rose above
$75 million, then fees would have automatically decreased by these same amounts.
At the time, the Bush Administration argued that an approach which shifted the focus of user fees
toward lock users would improve equity in waterborne commerce investments, since locks
account for most IWS capital construction expenditures. Both the House and Senate
appropriations committees rejected this approach, noting that a lock fee would pose an
unacceptable burden on lock users, who would pay considerably more under the Bush proposal
than they currently pay.27 Congress instead provided temporary relief through stopgap measures
(as previously mentioned) and requested that the executive branch revisit its approach.
Obama Administration
The Obama Administration’s budget requests to Congress have each proposed some form of new
user fee for inland waterways. The FY2010 budget included a proposal similar to the
aforementioned Bush Administration proposal, with the only major change being an option for
the Corps to further increase fees at high-traffic locks. The Administration argued that such a fee

25 The FY2009 budget requests assumed additional revenue based that would have resulted from an enacted bill.
26 A similar mechanism, also referred to as “capital recovery,” was proposed in the original 1978 inland waterway bill
but was not included in the final bill. See above section, “Previous Legislation: 1978 and 1986.”
27 U.S. Congress, House Committee on Appropriations, Omnibus Appropriations Act, 2009 (P.L. 111-8), Committee
Print, 111th Cong., 1st sess., March 2009 (unnumbered) (Washington: GPO, 2009), pp. 591-592.
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would increase both efficiency (by reducing traffic at these locks) and revenues.28 In its
consideration of FY2010 appropriations, Congress rejected the proposal.29 More recent Obama
Administration budgets have continued to propose user fees to replace or supplement the fuel tax,
while at the same time requesting an appropriation level based only on current-year expected fuel
tax revenues ($75 million-$95 million in recent years). Congress has generally rejected the user
fee proposals, but has agreed with the Administration’s approach of limiting revenues in lieu of a
long-term solution for inland waterways financing.30 Most recently, the FY2013 and FY2014
budgets each assumed approximately $80 million in new revenues resulting from an unspecified
inland waterway user fee (potentially similar to the system described below). To date, none of
these proposals have been enacted.
In addition to the aforementioned budget proposals, the 2011 Obama Administration plan for
deficit reduction included a new inland waterway financing structure among its recommendations
to Congress.31 The proposal was notable for its specificity, as it included more detail than most of
the aforementioned budget proposals. The Administration proposed to maintain the existing fuel
tax and institute a “two-tier” annual fee for commercial shippers that would be set by the Corps to
achieve a revenue target. Under the proposed structure, all inland waterway shippers would be
subject to a new annual fee in addition to the existing fuel tax. Vessels using inland waterway
locks would pay a higher fee than those not using locks. In its proposed legislation that would
have instituted this fee, the Administration did not specify an amount for the fee, but instead
stipulated revenue targets to be achieved, which are shown in Table 3.
Table 3. Obama Administration Deficit Reduction Proposal: Inland Waterways Fees
Fiscal year
Total Receipts Required to Result from New Fees
FY2012
No less than $35 million
FY2013
No less than $75 million
FY2014-FY2021
No less than $900 million total
FY2022 and thereafter
Such fees/receipts as are necessary to maintain an IWTF
balance of $50 million-$150 million
Source: 2011 Obama Administration Proposal: Inland Waterways Capital Investment Act.
Notes: The proposal assumed a “two-tier” fee in addition to the current fuel tax. It would levy a different fee on
lock users than other commercial users. The exact structure of these fees would be determined by the Corps.
The Obama Administration estimated that the 2011 proposal would result in approximately $1
billion in additional revenues for the IWTF over 10 years. While the balance of IWTF receipts
available for appropriation would increase under this plan, the overall cost share between the
General Revenue Fund of the Treasury and the IWTF would not change.32 The Obama

28 In contrast to the Bush Administration, the Obama Administration did not assume the revenues associated with this
proposal in its annual budgetary baselines.
29 H.Rept. 111-278 (conference report on P.L. 111-85), p. 58.
30 Notably, recent appropriations report language has stated that if the Administration and relevant authorizing
committees do not advance a satisfactory solution soon, then appropriators might be forced to act. See for example,
S.Rept. 112-75, 112th Cong., 1st session, p. 11.
31 Office of Management and Budget, Living Within Our Means and Investing in the Future: The President’s Plan for
Economic Growth and Deficit Reduction, Washington, DC, September 2011, pp. 32-33, http://www.whitehouse.gov/
sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf.
32 Similar to ongoing appropriations for inland waterways, these appropriations would be subject to discretionary
(continued...)
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Administration proposal included several other changes associated with the IWS, including the
addition of 39 individual segments of varying lengths to the existing inland waterway system.
Most of these proposed new segments are contiguous with the current system of inland
waterways, but are not likely to achieve significant new revenues.33 As was the case with the
aforementioned budget proposals, this fee was opposed by the user industry and was not enacted.
Inland Waterways Users Board Proposal
In 2010, the Inland Waterways Users Board (IWUB) adopted and transmitted to Congress a
proposal of its own.34 The report of its Inland Marine Transportation Systems Capital Investment
Strategy Team, Inland Marine Transportation Systems Capital Projects Business Model
(hereinafter referred to as the IWUB report), has come to represent the preferred alternative of the
inland waterway user industry and has been introduced as legislation in the 112th and 113th
Congress (see below section, “Issues for Congress”).35 Although the report was prepared at the
request of the IWUB and credited participation by some Corps employees, it was not formally
endorsed by the Corps or the Administration, and many of its primary recommendations have
been opposed by the Obama Administration.
Based on its own research and analysis and input by some Corps employees, the IWUB report
recommended a new financing system and a number of other proposed changes for inland
waterways. The report’s primary recommendations can generally be divided into four categories:
• Increase User Fees. Increase the existing IWTF fuel tax by $0.06-$0.09 per
gallon (30% to 45% above the current tax of $0.20 per gallon). The exact
increase would depend on future fuel tax revenues.
• Increase the Federal Share of Inland Waterway Costs. Modify the subset of
inland waterway investments subject to IWTF cost-share requirements (see Table
4) and make a corresponding overall shift to a larger portion of IWTF projects
being funded solely by the General Revenue fund.
• Increase Overall Spending on Inland Waterways. Increase the overall
investment on inland waterways.
• Other Recommendations. Increase IWUB involvement in project planning and
construction, and other recommendations, including the promulgation of
regulations that would formally adopt the report’s prioritization criteria.

(...continued)
budgetary allocations and would have to compete with other priorities.
33 The Administration did not include estimates for the additional revenues (either from the annual fees or the fuel tax)
resulting from the addition of the new segments. According to barge interests, many of these waterways are not
significant contributors to inland waterway commercial traffic.
34 Inland Marine Transportation Systems (IMTS): Capital Projects Business Model, Final Report: Revision 1, April 13,
2010, http://www.waterwayscouncil.org/WCIExtras/IMTS_IWUB_Report.pdf.
35 The IWUB commissioned the report and adopted its contents, with reported participation by Corps staff (although
the Corps and the White House did not endorse the report’s final recommendations). In addition to the IWUB, the
report was endorsed by multiple industry consortiums, including the Waterways Council, Inc., the American
Waterways Operators, and the National Waterways Conference, Inc. See http://www.waterwayscouncil.org/index/
capitalplansupport.pdf for a full list of endorsements.
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Table 4. Comparison of Existing and IWUB-Proposed Cost Shares for
Inland Waterway Construction

Source for Construction Funding

Currenta
IWUB Proposal
New Lock Construction
50% IWTF; 50% GR
50% IWTF; 50% GR
Lock Rehabilitationb


Less than $8 million
100% GR
100% GR
$8 million-$99 million
50% IWTF; 50% GR
100% GR
$100 million or more
50% IWTF; 50% GR
50% IWTF; 50% GR
Dams
50% IWTF; 50% GR
100% GR
Al Cost Overruns
50% IWTF; 50% GR
100% GR
Source: Inland Marine Transportation Systems Capital Projects Business Model, Final Report. April 2010.
Notes: GR: General Revenue fund, IWTF: Inland Waterways Trust Fund.
a. The Administration’s lockage fee proposal would continue current cost-shares with the IWTF (as previously
noted, the significant change would be to the means through which IWTF revenue is raised, not the cost-
share itself).
b. The IWUB proposes to change the definition of what constitutes “major rehabilitation.” Under the current
system, major rehabilitation (i.e., projects subject to cost-sharing) is any rehabilitation project in excess of
$8 million. The IWUB proposes to revise this definition to only include projects of $100 million or more.
Increase User Fees
The most prominent component of the IWUB report is a proposed increase to the inland
waterway fuel tax rate (currently $0.20 per gallon) of between $0.06-$0.09 per gallon. The
increase would depend on actual fuel tax collections over the next several years (i.e., if
collections are below recent averages, the tax would be higher). Overall, the report projects that
the new tax level would generate approximately $112 million per year in fuel tax revenues for the
IWTF, an increase over revenues from the last 10 years (approximately $85 million annually).
Despite this increase, most of the new revenue would not be spent until future years, which would
allow the IWTF to replenish its balances. As was the case with the original tax of $0.20 per
gallon, the proposed increase to the fuel tax would not be indexed for inflation and would not
include a capital recovery mechanism linking future taxes to expenditures.
Increase the Federal Share of Inland Waterway Costs
The IWUB report also proposes to shift more of the cost for inland waterway projects toward the
federal government by increasing the number of investments on inland waterways that are funded
solely by the federal government and decreasing the projects that are subject to 50/50 cost-
sharing. Under the report’s recommendations, all dam-related expenses (construction and
rehabilitation), as well as rehabilitation projects on locks with costs less than $100 million, would
be exempt from WRDA 1986 cost-sharing requirements.36 The IWUB report also proposes to
establish a “cap” on the use of IWTF funds at authorized levels to discourage construction cost

36 As noted previously, the current definition for “minor” lock rehabilitation (i.e., 100% federal lock funding) is any
rehabilitation project less than $8 million.
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overruns. Critics point out that this is an additional hidden cost, as currently all cost overruns are
funded equally between the federal government and the IWTF.37 Cumulatively, these changes
would affect the overall cost-share for IWTF projects. The subset of projects no longer requiring
cost sharing under the proposal would in effect increase the overall federal share for new and
major rehabilitation investments over the next 25 years from current levels (50%) to
approximately 70% for the same subset of projects.38 Differences between the current
arrangement and the report’s proposals are outlined by project type in Table 4.
Increase Overall Spending on Inland Waterways
The IWUB report proposes an overall increase in funding for inland waterways, including
increases in funding both from the IWTF and the General Revenue fund. As proposed in the
IWUB report, full funding for this suite of investments requires that annual expenditures (from
the GR fund and the IWTF) average approximately $380 million, a significant increase over
historical averages.39 This would necessitate an increase above average total expenditures since
1994, which have been approximately $234 million annually, and a significant increase over
FY2011 expenditures, which were estimated to be approximately $170 million under the
aforementioned “stopgap” measures.
In the immediate future, most of the increase needed to fund the proposed portfolio of $380
million per year would be derived from the GR fund (in order to allow the trust fund balance to
rebuild). For instance, to meet the IWUB proposal’s requirements over the first five years, federal
funding would need to be $1.33 billion, or 74% of the total funding required for the report’s
proposed projects over this time period. Around 2020, the proportion of funds derived from the
trust fund would gradually increase, although federal requirements would still exceed 50% of the
required investments. Although the report calls for an increased investment from both sources, on
the whole, more new funding would be required from the federal government (through the GR
fund) than the IWTF. Expected trends under the user proposal are shown in Figure 4.
Other Recommendations
The report proposed several reforms for improving cost-effectiveness of IWTF projects overseen
by the Corps.40 These recommendations would increase the involvement of the IWUB in the
Corps project delivery process for IWTF investments, thereby expanding the board’s current roles
and responsibilities. The report recommends appointing IWUB representatives to the project
design teams for individual projects, where they would oversee planning for IWTF investments
and report back to the IWUB. The report also recommends obtaining sign-off from the IWUB on
plans for projects funded by the IWTF, as well as providing the IWUB with status updates on all
relevant project planning documents. The IWUB seeks these changes as representatives of the

37 See final paragraph of this section for more information on efforts to address cost overruns.
38 Based on CRS analysis of Corps documents. The IWUB report outlines a general program of $380 million per year
for investments, including $270 million in federal contributions and $110 million in IWTF contributions (in effect a
71/29 cost share compared to current requirements). However, according to the Corps, the actual cost to implement the
proposed portfolio would result in less cost overall and a slightly different cost share compared to current levels (68/32
cost share compared to current requirements).
39 See IWUB report, p. xiii.
40 The full list of 21 project-based recommendations (including those already being implemented) can be found on pp.
xiii-xv.
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nonfederal cost-sharers. However, the degree of involvement by nonfederal entities in
development of studies by a federal agency could raise concerns related to conflicts of interest
and whether the federal government may lose control of the planning process.
Figure 4. Inland Waterways Projects: Projected Trends under IWUB Proposal

Source: CRS adaptation of Corps projections, as proposed in the 2010 Inland Marine Transportation Systems
Capital Projects Business Model.
Notes: The original IWTF proposal assumed implementation beginning in FY2011. FY2013 separates actual
values to date from CRS estimates based on the previous IWUB proposal. Projections for federal spending do
not include any potential cost overruns, which would be funded as a 100% federal expense under the proposal.
Fuel tax revenues based on IWUB proposal projections $112 million/year.
The IWUB report also delineated a list of specific projects to receive funding once its proposed
changes to the IWTF financing system are made. According to the report, projects were
prioritized for selection based on a number of factors, including asset condition, likelihood of
diminished performance, consequence of diminished performance, and the degree to which new
projects would improve system performance.41 The report did not propose mandatory funding for
these projects. That is, the final decision on whether projects in the list would receive funding
would still need to be made by Congress in the annual appropriations process (or by the Corps
when it allocates discretionary appropriations for a given year that are not specified at the project
level by Congress). The proposal attempts to render selection of these projects more likely by
recommending that the Corps promulgate selection criteria for inland waterway projects that are
similar to those used in the report.

41 IWUB report, p. viii.
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Other Proposals: Increase User Share of Costs
In the past, some have advocated for changes that would shift costs away from the federal
government and increase the user-financed share of inland waterway costs, by decreasing the
federal share of either O&M (currently 100% federal) or construction (currently 50% federal).
These groups have pointed to inequalities in spending relative to the value of certain segments of
the inland waterway system. An analysis by the Congressional Budget Office (CBO) in the early
1990s found that the current uniform tax throughout the inland waterway system failed to cover
fixed operational costs and thus distorted the actual costs of maintaining the system. CBO
concluded that a user fee structure that recovered the true costs for inland waterway operations
would increase economic efficiency of the system.42 Such a fee would result in increased costs for
waterways with low traffic-to-expense ratios, since federal costs for maintaining these waterways
are greater than fuel tax receipts currently generated. Figure 5 shows estimated fuel tax revenues
on major inland waterway segments relative to O&M costs and ton-miles.
Several entities have pushed for significant increases to inland waterway fees as a means to
achieve savings to the federal government. Recent proposals include the following:
• A coalition of taxpayer watchdog and environmental nongovernmental
organizations recommended in its 2011 “Green Scissors” report that Congress
increase user contributions for inland waterway expenditures. The report
estimated savings from this proposal to be $1 billion over the next five years.43
• The National Commission on Fiscal Responsibility and Reform included in its
initial list of illustrative savings a proposal to make the inland waterways “self-
funding.” The commission estimated $500 million in savings from this proposal
over the next five years.44
• In its 2011 budget options report, CBO included a proposal to increase user fees
on inland waterways to a level sufficient to cover the costs of construction,
operations, and maintenance. CBO projected that such a change would save
approximately $4 billion over a 10-year horizon.45
These proposals, which would all institute significant increases in the user share of inland
waterways financing, have generally stopped short of providing specific recommendations
regarding the exact structure of the user fees that would raise new revenues. The aforementioned
1992 CBO report noted that new user fees could take a variety of forms beyond an increase to the
fuel tax, but should better reflect the price to operate individual segments of inland waterways.
Such a fee could take one or more forms, including annual licensing fees, congestion pricing,
tolls, and/or lockage fees.

42 See Congressional Budget Office, Paying for Highways, Airways, and Waterways: How Can Users Be Charged?,
Washington, DC, May 1992, pp. 53-71, http://www.cbo.gov/ftpdocs/32xx/doc3249/1992-Transportation.pdf.
Hereinafter “CBO User Charge Report.”
43 This report also recommended elimination of federal funding for the Inland Waterway Users Board, at a savings of
$1.7 million per year. See Taxpayers for Common Sense, Friends of the Earth, Public Citizen, and the Heartland
Institute, Green Scissors: Cutting Wasteful and Environmentall Harmful Spending, 2011, pp. 23-24,
http://greenscissors.com/wp-content/uploads/2011/08/Green_Scissors_2011.pdf.
44 The commission did not provide backup information for this savings estimate. The proposal is available at
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/Illustrative_List_11.10.2010.pdf.
45 Congressional Budget Office, Reducing the Deficit: Spending and Revenue Options, Pub. No. 4212, Washington,
DC, March 2011, p. 105, http://www.cbo.gov/ftpdocs/120xx/doc12085/03-10-ReducingTheDeficit.pdf.
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Figure 5. Fuel Tax Receipts Relative to O&M Expenditures, Ton-Miles
(totals by waterway)

Source: CRS analysis of Corps of Engineers data, including 2009 Waterborne Commerce of the United States,
available at http://www.ndc.iwr.usace.army.mil/wcsc/pdf/wcusnatl09.pdf. Fuel tax data by waterway is based on a
model developed by the Tennessee Valley Authority for the Corps in 2008.
Notes: Ton miles equals cargo tonnage times the distance between loading and unloading.
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Issues for Congress
The proposals discussed above differ in important ways and bring up a number of issues for
Congress. Each proposal claims to resolve ongoing issues associated with the IWTF by proposing
new investment levels and revenue sources that would fundamentally alter the current financing
system for inland waterways. An overarching question for Congress is what level of new and
ongoing investment is warranted (or desired) for the inland waterway system. Once such an
investment level is defined, Congress may decide whether changes to the current user fee (either
changing the level of the fuel tax or incorporating a new fee) and cost-share arrangement are
warranted.
Legislation to alter inland waterways financing and project delivery has been introduced in the
113th Congress. H.R. 1149, the Waterways Are Vital for the Economy, Energy, Efficiency, and
Environment Act of 2013 (also known as the WAVE4 Act), would authorize the primary
recommendations of the IWUB proposal, including its project delivery recommendations, a $0.06
per gallon increase to the fuel tax, and alterations to the cost-sharing split for inland waterways
that would make the federal government responsible for 100% of dam construction and any
rehabilitation expenditure less than $100 million. S. 407, the Reinvesting in Vital Economic
Rivers and Waterways Act of 2013 (RIVER Act) would institute similar changes, except that the
fuel tax increase would be $0.09 per gallon and the maximum rehabilitation expenditure per
project funded by the federal government would be raised to $50 million rather than $100 million.
S. 601, the Water Resources Development Act of 2013, would enact the project delivery portions
of the IWUB proposal, but would not alter the fuel tax or overall cost-share.
Competing Views on Inland Waterway Navigation Investments
A central issue for Congress is the level and urgency of infrastructure investments on federal
waterways. Commercial users, including shippers and some agricultural interests, have argued
that additional investment is justified because of aging infrastructure, the need for expanded
capacity, and positive environmental externalities associated with inland waterway shipping
compared to other forms of shipping. These users argue that the benefits of inland waterways are
widespread. Their claims are countered by a number of other groups, including taxpayer and
environmental advocacy groups, who argue against increased federal funding for inland
waterways. These groups contend that the shipping industry often misrepresents or overstates the
benefits of these investments and that major funding increases for inland waterway projects are
not warranted.46
Despite these disagreements, most entities agree that the current system of financing inland
waterways is inadequate to address future needs (regardless of the precise level of those needs).
As a result of the recent funding drawdown, the Corps is expected to have appropriations for just
one ongoing lock replacement project (Olmstead Lock on the Ohio River) through at least
FY2016 under its current baseline for IWTF revenues.47 Barring a new source of revenue or
supplemental federal appropriations by Congress, new or ongoing IWTF construction projects
may be put on hold by the Corps, regardless of their urgency.

46 “Conservation and Watchdog Groups Oppose Barge Industry’s Plan to Shift Costs to Taxpayers,” press release, June
21, 2010, http://www.moenviron.org/pdf/NIC%20IWTF%20Proposed%20Changes%20Press%20Release.pdf.
47 Correspondence with David Grier, Corps of Engineers, April 11, 2011.
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Aging Infrastructure and Urgency of New Investments
The condition of Corps inland waterway facilities has been a primary driver behind the call for
increased investment on inland waterways. The Institute for Water Resources (part of the Corps
of Engineers) notes that the majority of locks in the United States are now past their intended
design age of 50 years.48 The Corps has connected this aging infrastructure to an overall decline
in the efficiency of its assets on inland waterways, noting that overall lock unavailability (both
scheduled and unscheduled) has increased in recent years.49 In some cases, the user industry
favors new lock construction and expanded capacity over ongoing maintenance for a number of
reasons.50
Other groups argue against significant new investments for inland waterway projects. In arguing
against new locks on the Upper Mississippi River, a coalition of environmental groups noted that
while the design life of new investments is usually only 50 years, regular maintenance can extend
the life of existing locks for an additional 50 years at a considerably lesser cost than that for new
construction.51 These groups generally argue that the costs of new lock construction greatly
exceed the benefits of reduced waiting time and lock unavailability, and point out that issues
associated with most aging inland waterways infrastructure can be overcome by improved small-
scale and nonstructural improvements.52
Waterway Traffic Projections
The Corps has in the past noted that the justification for most new navigation alternatives depends
greatly on traffic forecasts from future trade scenarios, which can themselves be difficult to
predict. These forecasts often depend on a number of interrelated variables, such as commodity
prices, the overall price sensitivity of shippers, and outside factors such as increases or decreases
in the efficiency of other modes of freight transit.
The Corps has noted that total domestic freight traffic is expected to increase by approximately
70% by 2020, but recently has avoided projections specific to inland waterway freight traffic.53
The Department of Transportation projects that the majority of this increase in freight traffic will
be on freight rail and highway traffic, with annual waterway traffic projected to increase 2% per

48 David Grier, The Declining Reliability of the U.S. Inland Waterway System, Institute for Water Resources, Army
Corps of Engineers, Alexandria, VA, 2009, http://onlinepubs.trb.org/onlinepubs/archive/Conferences/MTS/
4A%20GrierPaper.pdf (hereinafter referred to as Grier).
49 Grier, p. 3.
50 Expanded lock capacity can in some cases decrease the amount of time required for lockage of large barge tows,
which may be required to split into multiple tows in order to pass through smaller locks. The question of whether new
capacity was preferable to prioritized maintenance was a primary issue of debate in the case of recently proposed Corps
investments on the Upper Mississippi River-Illinois Waterway (UMM-IWW). See CRS Report RL32630, Upper
Mississippi River System: Proposals to Restore an Inland Waterway's Ecosystem, by Kyna Powers and Nicole T.
Carter.
51 Brad Walker, Big Price, Little Benefit: Proposed Locks on the Upper Mississippi and Illinois River Are Not
Economically Viable, The Nicollet Island Coalition, February 2010, p. 10, http://www.iwla.org/index.php?ht=a/
GetDocumentAction/i/2079. (Hereinafter “Walker.”)
52 This was one conclusion of a 2001 National Research Council study. See National Research Council, Inland
Navigation System Planning: The Upper Mississippi River-Illinois Waterway,” Washington, DC, 2001. p. 4.
53 Grier, p. 2.
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year between 2010 and 2035.54 Shipping interests point out that an overall increase in the
efficiency of inland waterways could lessen anticipated pressure on highway and rail shipments,
or at least maintain viability of inland waterways compared to these other forms of freight
shipping. Future lock upgrades or new construction would likely increase demand for inland
waterways. However, the extent to which these upgrades would have an effect on demand would
likely also depend on a number of other external factors.
Some groups have countered industry requests for new lock construction based on traffic
projections by noting that traffic has been flat or decreasing at some individual locks on high-
traffic portions of the inland waterway system.55 Observers, including former Corps employees,
have also criticized previous projections of traffic increases by the Corps and as overly
optimistic.56 To date, the Corps has avoided use of projected future traffic increases as a basis for
changes to the overall level of investments on inland waterways.
Environmental Considerations
Shipping interests also argue for increased investment in inland waterways because of the overall
value of inland waterways compared to other modes of shipping. They point to studies that have
concluded that barge shipping in particular constitutes a transportation alternative that is more
efficient and environmentally friendly than other forms of shipping, such as highway and rail. For
example, previous industry studies have calculated that railroads are 28.3% less fuel-efficient
than inland waterways.57 Additionally, they argue that inland waterways contribute significantly
fewer greenhouse gas emissions per mile than other forms of freight transportation.58 Studies
have also noted other benefits, including reduced highway congestion and noise reduction.
Taxpayer and environmental groups have questioned studies citing environmental benefits as a
basis for new investments in barge shipping. For instance, groups have disagreed with industry
fuel-efficiency calculations, noting that many industry studies have not taken into account
technical factors such as the directional constraints of river flow, or “circuity.”59 They argue that
the use of a conversion factor to account for circuity creates a more accurate picture of fuel
efficiency among various modes. They have also noted that using the fuel efficiency for “unit

54 According to the Department of Transportation’s Freight Analysis framework, waterway traffic (including harbor
and non-fuel taxed waterway traffic) is expected to increase by 2% per year from 2010-2035. See U.S. Department of
Transportation, Office of Freight Management and Operations, Freight Facts and Figures, 2009, p. 5. Available at
http://www.ops.fhwa.dot.gov/freight/freight_analysis/nat_freight_stats/docs/09factsfigures/pdfs/fff2009_highres.pdf.
55 See comments by the Institute for Agriculture and Trade Policy at http://www.moenviron.org/pdf/
NIC%20IWTF%20Proposed%20Changes%20Press%20Release.pdf. Accessed August 19, 2010.
56 Donald C. Sweeny, A Critique of “Final Re-Evaluation of the Recommended Plan: UMR-IWW System Navigation
Study: Interim Study,” Nicollet Island Coalition, September 2009, p. 9.
57 These studies generally define “fuel efficiency” as ton-miles per gallon. See for example, C. James Kruse, Annie
Protopapas, and Leslie Olson, et al., A Modal Comparison of Domestic Freight Transportation Effects on the General
Public, Texas Transportation Institute, Texas A&M University, Final Report, College Station, TX, December 2007, p.
41. http://www.americanwaterways.com/press_room/news_releases/NWFSTudy.pdf. (Hereinafter Texas Transporation
Institute.)
58 Texas Transportation Institute, p 34.
59 “Circuity” refers to the fact that rivers and similar bodies of water are constrained by their natural course, which may
be longer than the distance traveled between destinations on highway or rail. Some groups note that failing to account
for circuity skews fuel efficiency calculations in favor of barge tows. (Generally barge tows use less fuel per mile than
highway or rail shippers, but also have to travel a longer distance than these shippers to get to the same locations.)
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grain trains” instead of an average for all rail shipping would allow for a more accurate
comparison of fuel efficiency between barge and rail shipping.60
Environmental groups also note that inland waterway projects can negatively affect riparian
habitat and species by altering natural flows.61 Structural changes to rivers such as locks and
dams (which can create sedimentation, increase turbidity, and lead to other reservoir-like effects)
and levees (which separate rivers from flood plains) affect the natural state of these bodies of
water. Additionally, waterway traffic may also cause bank erosion through wave action. Thus,
increased construction and expansion of inland waterways can have negative environmental
effects.
Funding for Proposed Investments
User Fees and Other Revenue Sources
In addition to deciding whether additional investment is needed, Congress may also consider
changes to the system that finances these investments, including options for additional revenue
that were recently proposed to Congress. These options are the IWUB’s proposal (an increase to
the fuel tax), the White House’s proposal to the Joint Committee on Deficit Reduction (new
annual fees in addition to the current fuel tax), or other options such as a lock usage fee or some
kind of toll system.
The IWUB-proposed increase to the existing fuel tax would be somewhat in keeping with the
current system for user fees and revenue collection. Combined with increased federal
responsibility for some inland waterway costs, the IWUB argues, this proposal would rebuild the
trust fund balance and also fund new investments. While the tax would generate additional
revenue, some taxpayer and environmental groups argue that the associated increases to federal
cost share responsibilities tied to this proposal are unacceptable. The user industry has not
indicated whether it would accept increases to the fuel tax without the proposed changes to cost-
sharing arrangements.
The user fees proposed by the Obama Administration in 2011 would address the issue of
inadequate revenues by raising new fees from commercial users operating on the inland waterway
system. Under the proposed new system of fees, all commercial users would continue to pay costs
to utilize the inland waterway system in the form of fuel taxes and new fees for non-lock users,
while lock users would also continue to pay the fuel tax, but would pay an even greater fee. The
Administration also proposes to add new waterway segments to the list of fuel-taxed waterways
on the inland waterway system, further raising revenues.
The Administration argues that since commercial shippers are the primary beneficiary of
waterway investments, they should continue to pay the costs for new capital investments.
Furthermore, since lock users benefit the most, they should pay the most. The IWUB and
Congress have previously rejected lock usage fees and similar proposals as posing unfair burdens
on a subset of waterway users, and have opposed the new Administration proposal.62 The IWUB

60 Unit grain trains carry the same commodity, bound for the same final destination, and thus have superior fuel
efficiency compared to overall rail system averages. See Walker, pp. 15-16.
61 Walker, pp. 1-2.
62 For example, see “Waterways Council Reacts to President Obama’s Proposal for Inland Waterways Infrastructure
(continued...)
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argues that targeting users of individual segments runs counter to the idea of the inland waterways
as a whole “system” whose interconnectivity benefits the nation.63 Additionally, users note that
major fee increases will significantly affect shippers operating within the system.64 Finally, the
user industry has also argued against the proposed new fee because it delegates the authority to
set fees to the Secretary of the Army, with certain restrictions.65
Previously, other means to raise revenue have also been considered by Congress. Early forms of
the Inland Waterways Revenue Act of 1978 proposed a lock usage fee in lieu of the fuel tax
included in the final bill, and other fees have subsequently been proposed as replacements or
supplements to the fuel tax. In addition to lock usage fees, options such as annual licensing fees,
systemwide and segment-specific tolls, ton-mile charges, and lock charges for the most congested
portions of the system have previously been discussed as a potential means to raise revenues on
inland waterways.66 Theoretically, some of these items could also be combined with the current
fuel tax or other proposals.
A separate financing concept, known as “capital recovery,” was represented in the original 1978
legislation but was not enacted in the final bill. Under this framework, user fees would
automatically adjust to recover capital investments by the government.67 For instance, user fees
might increase when the IWTF balance drops below a certain level. Alternatively, annualized or
per-use fees could be structured to recover capital costs at individual facilities over time. Such a
fee could render less likely future shortfalls in the trust fund. It might also force users to narrow
those projects pursued to only the most vital authorizations. The concept appears to be
represented in the Obama Administration proposal, in which user fees would be tied to trust fund
balances after FY2022.68 Users have previously argued against capital recovery, noting that it is
difficult to plan for a tax that is constantly changing, and that such an increase could create an
“upward spiral” of cost increases in which a shrinking user base is responsible for more and more
costs.
Congress could also consider additional means to increase the reliability of the revenue stream for
inland waterways. An automatic adjustment for inflation has previously been discussed and could
be incorporated into either a fuel tax increase or a new lockage fee. An inflation adjustment could
provide additional future revenues and increase the real purchasing power of IWTF funds, which

(...continued)
Funding,” September 28, 2011, http://www.waterwayscouncil.org/Media%20Center/newsreleases/2011/
WCI_obama_plan.pdf.
63 Summary Minutes, Inland Waterways Users Board Meeting, 8/11/2009. Available at http://waterwaysusers.us/
Summary%20Minutes%2061.pdf.
64 See discussion on waterway traffic projections under the previous section, “Competing Views on Inland Waterway
Navigation Investments.”
65 As previously mentioned, under the proposed legislation, Congress would require that fees be set to recover a certain
amount of revenue annually. Thus, while the Corps would set the specific amount for the fee, Congress would
determine the total amount to be raised from such a fee.
66 See CBO User Charge Report, pp 53-71. In addition to its proposed lockage fee, the Obama Administration proposed
in the FY2010 budget that the Secretary of the Army be provided with authority to further increase lockage fees at
some individual congested locks (there was no limit to these proposed increases in the Administration’s legislative
proposal). This proposal was not enacted.
67 The IWTF and the 50/50 cost-share requirements were set up as a compromise in lieu of the capital recovery
requirement. While some oppose the concept of capital recovery, theoretically the two structures are not exclusive.
68 See Table 3.
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has decreased substantially since 1994. Some argue that such an automatic adjustment amounts to
hidden (and therefore unacceptable) tax increases in the future. (See box below.)

Indexing Excise Taxes to Inflation
Automatic inflation adjustments for excise taxes such as the IWTF fuel tax are an item of debate among policymakers.
Some argue that since construction expenditures tend to increase along with prices and wages, an inflation
adjustment of some type (for example, tied to the Consumer Price Index or Construction Price Index) should be
factored into taxes that fund these investments. In the case of the IWTF, the lack of an automatic inflation adjustment
in the fuel tax rates set in WRDA 1986 means that the overal purchasing power of IWTF revenues has decreased
since the tax was set at its current level in 1994.69 If the original tax had included an annual inflation adjustment based
on CPI, CRS calculates that it would be approximately $0.29 cents per gal on today, and would have resulted in
approximately $300 million in additional revenues since 1994, plus interest on the investment and federal matching
funds.70
Some excise taxes with similar characteristics to the IWTF fuel tax are indexed for inflation, while others are not. A
tax on aviation users was established in 1970 and is authorized to expend its funds on items such as airport planning
and construction, safety measures, and related departmental expenditures.71 Since 2003, this aviation user tax has
been indexed to inflation. Alternatively, the Federal Highway Trust Fund funds construction and operations and
maintenance on federal highways through a fuel tax of $18.4 cents per gal on, and is not indexed to inflation. As a
result, it has experienced a decrease in real purchasing power (similar to the IWTF). Some states, such as Maine,
Wisconsin, and Florida, index their state highway fuel taxes to CPI or some other measure of inflation, while other
states have recently considered this option but rejected it.

If no long-term solution is enacted to address the IWTF revenue shortfall, Congress may again be
forced to take measures to ensure the solvency of the trust fund. Previously, some of these options
have included capping IWTF withdrawals at the level of current year fuel tax revenues or putting
a temporary hold on all new contracts and focusing on ongoing work.72 Both of these options
would curtail investments on the inland waterway system to some extent. Congress might also
stipulate that some or all of the subset of IWTF investments be exempted from WRDA 1986 cost-
sharing requirements (similar to the exemption provided by Congress in FY2009 enacted
appropriations). However, an exemption such as this would have an additional cost to taxpayers
in the form of funds from the General Revenue account.
Cost-Sharing
A related question before Congress is whether the current cost-share arrangement for inland
waterway projects is adequately balanced. As previously mentioned, WRDA 1986 established
cost-sharing requirements for construction and major lock rehabilitation projects. Under WRDA
1986, construction and major rehabilitation were cost-shared, while “routine” operations and
maintenance was a 100% federal cost. Several years later, WRDA 1992 (P.L. 102-580)

69 Based on the Consumer Price Index, the current tax of $0.20 cents per gallon is equivalent to approximately $0.14
cents in 1994 (a decrease of approximately 30%).
70 This assumes that like most other excise taxes, an inflation adjustment for the IWTF fuel tax would be based on CPI.
Alternatively, another index, such as the construction cost index, might be an appropriate basis for adjustments.
71 Joseph J. Cordes et al., “Airport and Airway Trust Fund,” in Encylopedia of Taxation and Tax Policy, 2nd ed.
(Washington, DC: The Urban Institute Press, 2007), pp. 4-5.
72 Enacted appropriations for FY2011 agreed with the President’s budget request, which limited trust fund withdrawals
to current year fuel tax revenues.
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established that “major rehabilitation” should be defined as any upgrade requiring more than $8
million in total funding (among other requirements).73
The IWUB proposal would significantly modify current cost-sharing arrangements. As previously
mentioned, it would change the existing cost-share arrangement to exclude dams and minor
rehabilitation from cost-share requirements, shifting funding for these types of projects to 100%
federal funding from the General Revenue stream. Notably, the IWUB reasons that costs for dams
should be a federal responsibility because significant segments of the U.S. population benefit
from these structures.74 The IWUB also proposes a new threshold for what it considers to be
major lock rehabilitation, specifying $100 million as the new cut-off between routine operations
and maintenance and major rehabilitation.75 In short, the IWUB proposes to redefine the $8
million threshold established for projects in WRDA 1992, and replace it with a threshold of $100
million. This would in effect greatly increase the number of maintenance and rehabilitation
projects that are federally funded. Additionally, the report proposes to make all cost overruns for
IWTF construction projects a 100% federal responsibility. While some note that this provides
project managers within the Corps an added incentive to keep projects within budget, critics note
that the change represents an additional hidden cost to the federal government that is not reflected
in the IWUB report’s estimates.
The overall effect of the IWUB’s proposed changes would be to shift the overall costs for inland
waterway projects toward the federal government. Assuming the proposed project list in the
IWUB report, CRS calculates that the cost-share arrangement for IWTF construction projects
would shift from the current 50/50 arrangement to approximately 68% federal, 32% non-
federal.76 While commercial waterway users and the IWUB favor this shift in order to distribute
the cost-share burden, taxpayer and environmental groups note that the IWTF already benefits
from significant federal support in the form of 100% federal funding for investigations (studies)
and operations and maintenance. In recent years, this support has represented an additional $500
million-$650 million annually of federal expenses with no cost-sharing requirements.77 Assuming
existing funding trends for other Corps work supporting inland waterways (e.g., operations &
maintenance and investigations), CRS calculates that federal costs for inland waterways under the
proposal could rise to more than 90% of the total costs for the system. Currently, the federal
government is responsible for about 80%-85% of these costs annually, with some variation.
As noted above, the Obama Administration’s proposals have all recommended alteration of the
type and amount of user fees levied but not the overall cost-share between the federal and

73 Like the original fuel tax, this amount was not indexed for inflation.
74 IMTS Capital Investment Strategy Team, p. 69. An important point regarding this proposed change is that it includes
the dam portion of lock and dam projects. Thus, for future proposed upgrades or new construction of lock and dam
projects, the report proposes to divide up these costs (which are currently cost-shared). This may prove controversial,
since many argue that lock users benefit significantly from these systems.
75 WRDA 1992 (P.L. 102-580, §205) established a statutory definition for “rehabilitation” of Inland Waterways
projects. Generally rehabilitation projects are subject to the IWTF cost-share arrangement, while routine operations are
a 100% federal responsibility.
76 Several additional factors could potentially increase the federal share beyond the 68% level. For instance, this
estimated ratio does not account for cost-overruns that are currently cost-shared but would be a federal responsibility
under the IWUB proposal. Additionally, it assumes the annual funding for the IWUB recommended project list instead
of the overall IWUB program recommendation of $380 million per year (the latter results in a ratio of 72% federal,
28% non-federal).
77 CRS calculation based on Corps of Engineers Data as of September 2010.
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nonfederal expenditures. Thus, although these proposals would require new revenues from users,
appropriations from the IWTF would still need to be matched with funds from the General
Revenue fund, and the cost-share structure for the IWTF system would remain at 50/50.
As previously noted, some have argued in favor of shifting cost shares away from the federal
government and increasing user responsibility not only for construction, but also for operations
and maintenance of inland waterways. These groups, including some of the aforementioned
environmental and taxpayer interest groups, have argued that waterway users should not only pay
for 50% of construction and major rehabilitation costs, but also pay for some or all operations and
maintenance costs, which are currently fully funded by the general treasury revenues. While
Congress has in the past rejected these proposals, they may once again be considered in the
context of overall government cost-cutting efforts.
Other Issues with Inland Waterway Planning
The IWUB has also asked Congress to weigh in to provide reforms to Corps IWTF planning
processes. Among other things, the IWUB proposed a number of reforms to increase its
involvement and improve project prioritization. Industry users argue that many of these reforms
will decrease the likelihood of cost overruns, which have in the past been a problem for IWTF
projects. A previous study by the Corps concluded that in several cases, a number of factors
contributed to cost overruns, including inaccurate construction schedules and costs, general cost
escalation, and non-optimal funding. However, the degree of involvement by a non-federal entity
in the planning and decision-making process could raise concerns related to conflicts of interest.
A related item that may receive congressional attention is the Corps’ method for prioritization of
all inland waterway projects. As noted in the IWUB report, IWTF investments to date have
usually been considered in isolation; that is, there is no formal set of criteria used to make
decisions among investments competing for IWTF funds. Instead, these decisions are largely left
to the Corps and the Administration (in the annual budget formulation process) and Congress (in
the appropriations process). The IWUB proposes to alter this practice by adopting a priority
ranking system, which is described in detail in the IWUB report.78 Significantly, the IWUB report
recommends that this system be promulgated as a regulation. This could fundamentally affect the
role of Congress in the project selection and funding process.79 Currently, Congress decides on
project-specific authorizations and appropriations for Corps inland waterway projects. If a system
for prioritizing investments, such as that recommended in the IWUB report, is promulgated as a
regulation, the Corps would utilize these criteria to select projects for funding, and the role of
Congress could be limited to providing project authorizations and overall funding levels. Such a
role would be a departure from Congress’s previous role in directing Corps projects, although
some might argue that it is consistent with the federal approach to project allocations for other
agency programs, such as the Environmental Protection Agency’s state revolving fund programs
for drinking water and wastewater.80


78 IMTS Capital Investment Strategy, pp. 23-66.
79 See IMTS Capital Investment Strategy, p. xv.
80 For more background on these programs, see CRS Report RL30478, Federally Supported Water Supply and
Wastewater Treatment Programs, coordinated by Claudia Copeland; and CRS Report RS22037, Drinking Water State
Revolving Fund (DWSRF): Program Overview and Issues, by Mary Tiemann.
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Author Contact Information

Charles V. Stern

Specialist in Natural Resources Policy
cstern@crs.loc.gov, 7-7786


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