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River Dredging Recalculated by Jim Barnett & Dylan Rivera Guest column, Spokesman Review, July 11, 2002

The Oregon senator, drawing White House opposition, seeks to limit wholesale costs amid crisis

The U.S. Army Corps of Engineers on Wednesday scaled back expectations for its proposed deepening of the Columbia River navigation channel, saying the project will not cut shipping costs as much as earlier expected but still is a good deal for taxpayers.

In a new report, the corps lowered its 50-year forecast of the project's benefits from $34.4 million a year to $18.3 million to reflect the impact of the Asian currency crisis, a strong dollar and a cooling world economy. The corps also found that construction costs would be less than it first predicted three years ago.

Bottom line, the corps said, the project would return $1.46 in reduced shipping costs for every $1 taxpayers spend dredging 106 miles of the Columbia from Portland to Astoria. That compares with the corps' 1999 prediction that dredging would save about $2 for every $1 spent.

Ports along the Columbia hope the dredging project will reverse their fortunes as international shipping lines focus their operations on bigger ports that have deeper harbors and are located nearer the coast.

Proponents of the project, led by six Lower Columbia River ports, cheered the corps' latest assessment, saying it proved that deepening the Columbia remained a sound investment.

"We are encouraged that the project still shows strong benefits despite downturns in international markets," said Larry Paulson, Port of Vancouver executive director. "It is important to remember that the Corps of Engineers' benefit-cost ratio represents national impacts and does not include important local economic benefits that maritime commerce and channel deepening bring to the region."

Port of Portland executive director Bill Wyatt was on vacation and not available for comment. Other Port officials said they were reviewing the analysis and look forward to a series of public hearings the corps has scheduled for later this summer.

Critics say the corps routinely exaggerates the benefits of such projects.

Although the corps dialed back its forecasts for commodity shipments, it still is likely to overestimate the potential for growth, said Phil Baumel, a professor of agricultural economics at Iowa State University.

Increasingly, the United States is losing out to competing nations that can produce wheat, corn and soybeans at lower costs. In particular, the corps' prediction for any growth in trade of soybeans and corn is likely to be mistaken, he said.

"For anyone to make a firm prediction that this is going to happen is ludicrous," Baumel said. "There are too many forces that are going against dramatic increases."

Under the corps' plan, the Columbia channel would be deepened to 43 feet from its current 40 feet to accommodate new generations of deep-draft ships. With additional clearance, big ships can carry more cargo and reduce operating costs.

The project has been in the planning stage since the late 1980s, but it is entering a crucial phase. The next step is to secure the first installment of construction money, which proponents hope will be included in President Bush's 2004 budget.

"Obviously the greater the cost-benefit ratio, the more persuasive the argument," said Rep. Brian Baird, D-Wash. "But I think a strong argument can be made that this is clearly cost-beneficial given this report."

In March, The Oregonian reported that the corps' original economic analysis relied on flawed and outdated data and inflated estimates of the project's benefits. The newspaper found dredging would save just 88 cents for every dollar taxpayers spend.

Port and corps officials disputed the newspaper's findings.

In its new analysis, the corps pegged the cost of the project at $156.2 million, down from $188.6 million. Some savings come from lower estimates of sediment that must be dredged. But the new cost figure also excludes the cost of dredging the Portland harbor, which has been delayed by a Superfund cleanup.

At the same time, the corps included benefits for exports it had not counted before. The corps added soybeans to its list of commodities that would gain from the project, which had previously included only wheat, corn, barley and containerized cargo. It estimated that ships carrying soybeans could cut their operating costs by about $1 million a year.

The corps said ships in the Columbia River are getting bigger than they had expected. That's especially true for vessels that move shipping containers, the -20- to 40-foot-long metal boxes that exporters stuff with products ranging from frozen vegetables to scrap paper.

Of the ships that leave Portland bound directly for overseas ports, the corps had expected that 34 percent would be designed to sail at 39 feet deep by 2004.

Today those vessels have nearly disappeared from the river, the corps said. Instead, ships more commonly range from 41 feet to 46 feet.

"The vessels themselves are much deeper, and it means that they can utilize the channel to a larger degree than what we had estimated before," said Brian Shenk, corps economist.

The corps' report rekindled a debate over how best to promote trade and build the region's economy while also protecting the environment and downriver communities that must contend with the corps' disposal of tons of sediment.

Critics said the corps has downplayed the impact on fisheries where sediment would be dumped. In fact, the corps excluded the cost of some environmental restoration projects it will undertake while dredging the river.

"The federal government acknowledges that the Columbia River estuary has been and continues to be abused," said Peter Huhtala, executive director of the Columbia Deepening Opposition Group. "Yet the corps insists on pushing a project that would further degrade the river environment."

Dredging a channel to expedite already subsidized shipments of wheat and corn seems like a waste of tax dollars, said Murray Weidenbaum, an economist who was President Reagan's first chairman of the Council of Economic Advisers.

"If you don't need the extra grain in the first place, why spend money to expedite its shipping?" asked Weidenbaum, who writes and teaches about public policy at Washington University in St. Louis.

"There are a lot of worthy people in this country who would like some help from the U.S. Treasury," Weidenbaum said. "It's supposed to be a free enterprise system here."

Questions about the corps' method of assessing benefits and costs of navigation projects have prompted an internal review and calls for reform of the agency.

The corps has halted several major projects after independent analyses found flaws that overstated benefits. Most recently, the agency stopped plans to deepen the Delaware River after the General Accounting Office concluded that the corps overstated benefits by 67 percent.

In a report issued in June, the GAO, the investigative arm of Congress, said the corps used invalid assumptions, relied on outdated data and made math errors in its $311 million plan for the Delaware.