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Ohio River locks failure highlights need to complete 22-year project

A long-delayed, over-budget project to overhaul the aging locks on a major coal shipping route on the Ohio River might be nearing the finish line — 17 years after it was supposed to be finished.

The Olmsted Locks and Dam project is being built on the Ohio River near Brookport, Ill., about 17 miles upstream from the place where it meets the Mississippi River. The project will replace the aging Locks and Dam No. 52 and 53, which were built in the late 1920s and are now falling into serious disrepair, causing delays for coal deliveries.

Debra Calhoun, senior vice president of the Waterways Council Inc., told S&P Global Market Intelligence that the project was authorized in 1988 with a budget of $775 million. Work began in 1995, using a new building technique that would install the replacement dam and locks in a wet environment with floating barges and cranes. Calhoun said the technique was supposed to save $60 million and take four to seven years.

"The [U.S. Army Corps of Engineers] at that time said that we're going to try a relatively untested construction strategy," she said.

Strong currents and icing presented obstacles to the new method, though, and the initial contract for wet construction received no bids because no one could get bonding for the work, said Mike Toohey, president and CEO of Waterways Council, an advocacy group for river infrastructure. The Army Corps then offered a cost-plus contract, which would guarantee that all costs would be covered by the government.

Olmsted Locks and Dam project will end up cost at least $3.1 billion and is still not finished, almost 30 years after its authorization. The twin locks were completed in 2002, but the dam has experienced more than a decade of delays.

Speed is becoming of the essence for Olmsted's completion as the old systems around Brookport are failing. The wickets, or paddles at the bottom of a canal gate, on Locks and Dam No. 52 suffered damage that stopped traffic for more than a week in September, and failures of the hydraulic mechanisms that open and close gates have forced lock closures twice this month. As of the morning of Oct. 13, there were 69 towboats or vessels with 746 barges waiting to transit that section of river, according to Calhoun.

Carol Labashosky, spokesperson for the Louisville district of the U.S. Army Corps of Engineers, told S&P Global Market Intelligence that the Olmsted project should be complete by fall 2018, and that "the dam construction is going as planned."

Coal industry representatives have expressed hope that the Trump administration's $1 billion infrastructure plan could help the sector by fixing up old locks and canals vital to inland shipping. Locks and Dam No. 52 alone moves 14 million tons of coal, lignite or coal coke per year on average, according to Calhoun.

Speaking at the annual conference of the National Coal Transportation Association on Sept. 19 in Denver, Calhoun said support from the top level of the government is critical for improving locks and dams, which would give waterways infrastructure a boost. She said when President Donald Trump gave a speech on the Ohio River lamenting the "massively underfunded" system of locks and dams, it was the likely the first time since President Franklin Roosevelt and the New Deal era that gave funding to many of the locks and dams still being used today including Locks and Dam 52 and 53 that a president visited a river facility.

"The river and its infrastructure has been neglected for far too long and is in need of recapitalization and modernization," she said. "We were really gratified to see him make the trip there."

Scott Tuer, chief financial officer of Three Rivers Marine and Rail Terminals LLC, told S&P Global Market Intelligence that Olmsted is not only "tremendously over budget," but that the project swallows up all the limited amount of money available for inland waterways infrastructure.

"Our inland water system is the envy of the world, but we don't spend the money to maintain it," he said.

He blames Congress for not taking more action to address the problem of Olmsted and river locks and dams in general.

The money Tuer refers to comes from the Inland Waterways Trust Fund, authorized by Congress in 1978, which collects a fuel tax on commercial towing companies and puts it toward construction and rehabilitation projects. Every dollar invested by the fund in infrastructure is matched by a dollar from the U.S. Treasury. An Army Corps fact sheet said revenues have been flat or declining in recent years, though, and the few remaining resources have been used for the Olmsted project.

"Without measures that would increase IWTF revenues, most other projects being cost-shared from the IWTF will need to be curtailed pending completion of Olmsted," the Army Corps said.

The Water Resources Reform and Development Act of 2014 changed the funding mechanism for Olmsted to an 85% share from the Treasury. "The cost just became outrageous for Olmsted," Calhoun said, so the change freed up some money for other infrastructure projects on waterways.

Calhoun said if more aging lock systems break down, transportation of millions of tons of coal could shift from rivers to roads, increasing shipping costs for coal producers and putting extra stress on highway infrastructure.

Dan Horn, the senior vice president for metallurgical coal sales for Alpha Natural Resources Inc., told S&P Global Market Intelligence that some of the coal producer's customers use the locks on the Ohio Rivers and would benefit from improvements.

"If the locks went down, transportation costs would likely go up," he said.