The CEO “Six Pack”

Friday, June 10, 2005
For the third year running MarineNews was able to tap the minds of six prominent industry leaders in an attempt to deliver exclusive insights as to the direction of the workboat and shallow draft market for the coming years. Our annual “CEO Six Pack” has become a perennial reader favorite, and this year we are fortunate to have yet another stellar collection of execuitves, including:

• Al Anderson, Vice President of Government and Public Affairs, CHS Inc. • Raymond Butler, Executive Director, Gulf Intracoastal Waterways Association (GICA) • Rick Calhoun, President and Chairman, Cargill Marine and Terminal, Inc. • Steve Golding, President, Golding Barge Line, Inc. • Gary LaGrange, President and CEO, Port of New Orleans, and • Paul E. Mauer, President, Trinity Marine Products, Inc. Al Anderson • CHS MN: What is the most important message about the inland waterways industry that needs to be conveyed to the media and policymakers?

Anderson: The most important message for our industry to convey to both media and decision makers is that we exist and that we are economically and environmentally vital to the country. It has always been amazing to me that the most demonstrably efficient and environmentally sound transportation mode is either totally ignored or gets bad press. Because we are a small, at times insular industry, and because few reporters have any knowledge or understanding of waterborne transportation, about the only time we make the newspapers or evening news is when a tow hits a bridge or barges break loose. This is especially frustrating in my area because there are so many positive stories that media people could be telling. When there are river cleanup efforts, for example, local shippers and harbor service companies lead the charge and provide a towboat and barges to haul away the tons of junk collected. Another story that was never told was how Upper River Services, a St. Paul harbor service company, along with Cargo Carriers, and Caterpillar, made it possible for Chad Pegrake and his river cleanup organization to have the tow boat they now use to clean up rivers around the nation. I realize that the industry has been in an economic recession for many years and unable to afford a well funded public information campaign, but I think we as individuals and our company leaders can get to know which reporters might have an interest in the river industry and work with them on stories of mutual concern. An excellent example of inexpensive ways this can be done is MARC 2000's recent list of the, "Top five endangered locks of the Upper Mississippi System." This list has gotten wide coverage both in cities near the "endangered" locks and elsewhere when the Associated Press picked up the story.

MN: If you could have the federal government change one policy, what would it be?

Anderson: If I were king, I would decree that lawmakers view transportation infrastructure as an economic engine that drives the economy, not the other way around. So rather than quibbling about the numbers and model used to project traffic growth on the Upper Mississippi River System, we should recognize that all parties agree there will be significant traffic increases in the next 50 years and build with that in mind. Recent figures from the Minnesota Department of Transportation (MNDOT) show that in 2003 farmers from that state shipped 7,457,309 tons of corn, wheat and soybeans to the gulf in barges at an estimated $11.45 per ton. A similar rail trip would have cost $20.33, which MNDOT says translates into savings of $66,220,904 for farmers using the waterway. Barge rates also put pressure on freight costs well beyond the reach of the system. If we want this economic engine to keep working for Midwest farmers and other shippers, we must fund the seven new locks called for in the Water Resources Development Act (WRDA) recently introduced by Missouri Senator Kit Bond. To me it's a bit like the line from the movie" "If you build it, they will come." And they'll be here before we know it.

MN: What are some of the bottlenecks that exist on the system?

Anderson: Those of us on the upper end of the Mississippi River system have more than our share of problem areas and single-chamber, 600-foot locks. One that is of special concern is Lock and Dam 3 at Red Wing, Minn. When The Corps' Mississippi Valley Division leader Brigadier General Robert Crear was in St. Paul recently, he told local river industry leaders that the long delayed work to correct embankment and outdraft problems is now considered a "new start" because of the delay. He also indicated that work is part of a "significant backlog" of under funded O&M projects. The need for the work was reinforced recently when eight barges filled with cement were caught in the outdraft and struck the roller gates. The Corps says that the lock's position on a river bend tends to sweep tows away from the lock and toward the gates. The recent incident makes 12 accidents since 1968. There's also worry about losing the pool if one of the 3 embankments on the Wisconsin side lets go. The WRDA bill I just talked about identifies the other bottlenecks of concern that will be remedied with 1,200 foot locks at Locks 20,21,22, 25 and 25 on the Mississippi.

Raymond Butler • GICA MN: What is the most important message about the inland waterways industry that needs to be conveyed to the media and policymakers?

Butler: The Inland Waterways Industry offers a desperately needed solution to our country's need for expanding its arteries for bulk freight movement. One large inland tank barge can remove up to 150 tank trucks from our highways. It can move cargo using less than one tenth the amount of fuel and resultant air pollution produced from a truck on the highway. Here in Houston, and increasingly across our country, local government is now realizing that they must identify clear methods for reducing traffic congestion and air pollution, as these areas continue to grow, and existing methods of freight transportation are seen as a problem source. The European Economic Union has realized this for several years and has taken measures to encourage development of their waterways. We are sadly behind in this realization. Adding urgency to this message is the fact that we have not seen fit to even maintain this vital national interstate water highway system, and it is in need of significant repair. Our country has been fortunate to have had visionary forefathers that pursued the dream of building a system of waterways that continue to serve this country's expanding needs with little or no modification since completion over 50 years ago! An intriguing question we should ask ourselves is "Could we ever dream of completing the construction of such a waterway project today?" Thanks to the visionaries of the past, we have a system with capacity to handle our needs for several generations to come. We just need to maintain it!

MN: If you could have the federal government change one policy, what would it be?

Butler: We should have a national transportation policy that would include a provision, similar to those used in Europe, requiring evaluating the feasibility of waterway transportation as a first option for all new projects that would increase load on our rails and highways, before any other method of bulk freight movement could be utilized. In my view, waterways should be as much of a consideration these days as our interstate highway system. We should consider the same policy and forethought to that used to develop our interstate highway system over 50 years ago. I am not sure that there is any other realistic option to be honest. The cost to all of us, in terms of environmental damage, real estate, efficiency, and tax dollars of continuing to ignore the advantages offered from maximizing the use of our existing waterway system, is just plain unacceptable. Before we attempt to expand our land-based systems, a national study of future needs and use of "best mode" should be part of our national agenda.

MN: What are some of the bottlenecks that exist on the system?

Butler: I would like to answer this question by taking some license with the word "bottlenecks". First, and foremost of the bottlenecks are our locks on the system. Well over half of them are past their design life, yet continue to serve increasing levels of traffic, with decreasing efficiency. We attempt to capture the resulting traffic delays, but my first hand experience tells me we are missing some significant costs. Maintenance needs continue to escalate as these structures age, and the benefits of making improvements are foregone for many years. As we continue to lengthen project completion times to well past the 20-year mark, completion costs, transportation penalties, and maintenance costs all continue upward. There are also a number of bridges on our waterways that have been designated by the Coast Guard as Obstructions to Navigation, with orders for their alteration or replacement having been issued as well, yet their replacement remains unfunded. These structures pose hazards both to navigational interests as well as those who use the bridges. Finally, although not a physical bottleneck, it is long past time for us to reconsider how we maintain "balance" with our Federal support of environmentally based initiatives, and our basic needs as a growing, energy based economy that finds itself competing daily in a world market. I am hearing more and more talk in the news these days from major industry decisionmakers that they will not plan any extensive expansion in the United States in the future because of our requirements for permission to build here. Our need for a National Energy Policy is more critical than many of us realize. Because of the very nature of the benefits afforded by inland waterway transportation we are taking proactive measures to preserve the environment when we foster the maintenance and expanded use of our waterways. We should consider these facts when faced with the choice of where to place funding. We can unintentionally reduce opportunities to improve our environment by adding "environmentally specifc" options to waterway projects, which can financially "weigh down" the entire project making it fall beyond means of justification. This practice can result in no project at all, and continuation of "the same old way of doing business". In the end, the environment, as well as industry, both lose.

Rick Calhoun • Cargill MN: What is the most important message about the inland waterways industry that needs to be conveyed to the media and policymakers?

Calhoun: I think this question has been at the forefront of this industry for a very long time and I am afraid I don't have a unique or particularly insightful answer. I personally have spoken to this issue on a number of occasions. That said, I don't think you can reinforce it enough. This country needs a viable inland waterways system in the United States. Not only to move grain and other agricultural products to market in a cost-efficient manner, but to also move imported and domestic goods up the river to markets. We need a viable, dependable system in order to serve customers. In my role at Cargill, I deal with all the major rail carriers in this country as well as the barge industry. The rail infrastructure in some parts of this country is at or near capacity. Carriers are pushing business away. Our highways are congested with trucks. It has been said a thousand times but the inland waterway system represents the most productive transportation system in this country today and we need to continue to fund the maintenance, rehabilitation and expansion of the lock and dam system. The river system is critical to Cargill's customers on both ends of the supply chain, from producers in the United States to consumers in foreign countries.

MN: What is the most pressing challenge you feel is facing the inland waterway industry today?

Calhoun: The obvious answer is funding of the system. We need our policy makers to understand the value of this resource and adequately fund it. But beyond the obvious, there are some other interesting choices this industry must face in the years ahead. Look at just the last year or so in this industry. Steel prices have skyrocketed over the past year. The cost of replacing covered barges nearly doubled in a very short period to time. Likewise, fuel costs have reached record highs and volatility in prices remains problematic for anyone operating assets on the inland waterway system. Many barges built on the heels of the Russian grain boom in the late 1970's are reaching the end of their useful life on the river. To the south, demand for barges is growing in Brazil, Argentina and Paraguay-and assets are being pulled from this country to others. Northbound demand-or perhaps better put-non-grain demand-has exploded. My point is this industry faces a future with as much risk and uncertainty as we have perhaps ever seen.

MN: What do you hope the industry looks like in the next decade?

Calhoun: I hope the industry gets the much-needed funding we have fought for-for such a very long time. That we have a viable system to navigate. We need this to serve customers and to help maintain the economic growth in this country. I hope it is a profitable industry that can provide reasonable services to users. An industry that can provide safe and gainful employment for citizens of this country. I trust that it will be an industry that will embrace new ideas and innovation, while holding on to some of the wonderful traditions which have made it such a fun and interesting place to work. I am relatively new to the barge industry. There are people in this industry who have forgotten more than I will ever know about the river. I appreciate the opportunity to spend a portion of my business career in this industry and look forward to the challenges which lie ahead. Steve Golding • Golding Barge Line MN: What is the most pressing challenge you feel is facing the inland waterways industry today?

Golding: We have a lot of challenges before us, but clearly one of the more pressing ones is the shortage of on-board personnel in the skilled positions. The average age for pilothouse personnel has got to be much higher now than it was in past years. We are starting to see a lot of retirements from a large group of pilots broke into the pilothouse back in the 60's. In addition to retirements, there are a lot of pilots who are finding themselves physically disabled and being forced to leave the river at an earlier age than they had planned on. Not only is there a strong demand for pilots, but there is also a shortage of good quality tankermen as well. A large percentage of the tankermen serving our industry are in their 20's to mid 40's. To some degree, this position becomes a transitory one in that a lot of tankermen move on to the pilothouse, engine room, or simply quit the river when they realize they do not have what it takes to become a pilot or an engineer. Because the career horizon for tankermen is usually much shorter than that of a pilot, it forces a tankbarge operator to continually need to train more tankermen than he does pilots. I think our industry has done a good job in attracting a higher caliber worker on our vessels than we had onboard back in the 70's. There will continue to be tremendous challenges before us in order to find the kind of person who will work onboard for (6-8) months out of the year. As an industry, I think we all will need to step up our training of pilots in order to try and balance the number of new pilots coming into our industry with the older ones going home to the rocking chairs. Of course, this training process means an extra expense to the operator as well as possibly a certain amount of risk until the trainee becomes a seasoned pilot. In order to meet this challenge, we must all expand our training programs and work harder at attracting the type of personnel who can successfully fill these skilled positions.

MN: What are some of the emerging trends in the industry?

Golding: One of the trends that I'm seeing is a renewed interest in trying to achieve a higher level of fuel efficiency. There has been a great deal accomplished in this area in past years, but the awareness seems to have been raised to a whole new level with today's fuel prices. When you add in the user fees, we are in the neighborhood of $2.00 per gallon. When I started operating my first boat, I remember paying 9.9 cents per gallon for fuel in Port Arthur, Texas. Although I no longer own that boat, it is still operating today with the same (35) year old engine packages, while the cost of fuel is (20) times higher than it was in 1972. We are seeing the pace of new construction of boats with super fuel efficient engine packages starting to increase. I think that with today's fuel prices, most operators are starting to examine all their options as some of these older boats with inefficient engines near their major overhaul cycles.

MN: What do you hope the industry "looks" like in the next decade?

Golding: I would like to see our industry be able to diversify the products shipped via barge in the coming years. I think that the transportation of containers on barges to inland ports is extremely exciting and has great potential for growth. Our highways are all at or near their maximum capacity, so our inland waterways system should offer the shipper a great alternative. I always enjoy seeing the military taking advantage of barge transportation by mobilizing large convoys of equipment. In addition, we've also seen movements of parts for NASA, power plants, bridge construction and a lot of other "out-of-the-ordinary" types of barge loadings. I would like to see the barge industry expand these types of movements and continue to develop a more diverse mix of product shipments in the future. In closing, I would like to see our industry do a better job of educating the public about all the many positive aspects of the inland barge industry. We have gotten better at this in the past (2-3) years, but there is still a lot of work to be done in order to raise the public's positive awareness about our industry. This needs to be continually done in order to counter the negative press we get when an inland vessel is involved in a major collision or other incident. We are fortunate as an industry in that we have a really fantastic and environmentally pleasing story to tell. It is up to us as operators to get in front of our legislators, elected officials, and various forms of the media and talk about the many positive aspects of an industry that we are all fortunate to work in.

Gary LaGrange • Port of New Orleans MN: What is the most important message about the inland waterways industry that needs to be conveyed to the media and policymakers?

LaGrange: We haven't fully harnessed the power of this nation's inland waterways, and we should. At the Port of New Orleans, we connect the Mississippi River, the heart of that inland waterway system, to the world. You can travel 14,500 miles on the inland waterway system, reach 33 states and access 62 percent of the American Consumer spending public. We cannot afford not to take full advantage of this incredible transportation resource.

MN: What is the most pressing challenge you feel is facing the inland waterways industry today?

LaGrange: Funding. We must find the funding for lock and dam projects that allow us to get the most out of this transportation resource.

MN: What are some of the emerging trends in the industry?

LaGrange: Throughout my 30 years as a port executive in Louisiana and Mississippi, there has always been talk about the possibilities of container on barge operations. From our perspective at the Port of New Orleans, it appears that the dream of container on barge is becoming a reality. Osprey Lines has been operating container on barge operations for several years in the Port of New Orleans. They have regular services to Baton Rouge, Houston, Memphis and Chicago, and recently started a short sea shipping service that calls New Orleans, Houston and Tampa. CSG Company, which operates the Port of Leetsdale outside Pittsburg, recently started a container on barge service between the Port of New Orleans and Pittsburgh. As these services develop, the type of cargo that travels in containers are going to expand. These services allow for cargo that isn't time sensitive to be removed from the nation's highways and give shippers new transportation and inventory options.

Paul E. Mauer • Trinity Marine Products MN: What is the most important message about the inland waterways industry that needs to be conveyed to the media and policymakers?

Mauer: I believe the most important message that must be conveyed to the media and policymakers is that the inland river waterways are critical to our economic success as a country. The inland river waterways provide an efficient, safe and environmentally friendly means of transportation that is critical to the United States' ability to compete on a global basis in the agricultural industry, as well as in domestic industries that require coal, aggregates, chemicals and petroleum products. The world continues to march toward a global economy. Manufactured goods, commodities and services are being sourced to and from many different countries. For the US to be successful competing with these other countries, the media and policymakers must focus attention on improving the infrastructure of the inland waterways for transportation. The move toward a global economy is challenging many U.S. industries that rely on the inland waterways. Two of the most critical industries being impacted are agriculture and steel manufacturing. South America continues to aggressively market agricultural products to the rest of the world. The ability for South America to increase global sales of agricultural products has been hindered by difficulties associated with transportation of the product to market, predominantly because of the poor condition of the road and waterway infrastructures. As South America and other countries continue to invest in improving infrastructure and thus improve efficiencies in reaching a global market, the US continues to fall behind. The recent increase in the number of barges being shipped to South America may be signaling an improved transportation system there. With regard to steel manufacturers, the rise in steel prices over the last twelve months clearly demonstrates the global market in which the US is participating. A surge in demand in China, coupled with the consolidation of steel manufacturers in the United States, has pushed steel plate prices to record highs. The rise in steel prices has negatively impacted the cost of new barges, thus affecting barge owners' ability to replace or grow their business. The media and our policymakers need to understand that investment in the inland waterway infrastructure is vital to industries in the US and to our continued success in a global economy. Not only does investment in the inland waterways help us competitively on a global basis, it creates a more efficient means of transportation in all industries that rely on water-borne transportation to support their business operations.

MN: What is the most pressing challenge you feel is facing inland waterways industry today?

Mauer: The most pressing challenge facing the inland waterways industry is the approval of the WRDA bill. Our country's decaying lock and dam system on the Illinois River and the upper Mississippi River is a lock failure away from crippling the upper Midwest's economy. There are five locks on the upper Mississippi and two locks on the Illinois River that are over 50 years old and are in urgent need of replacement. This is not a recent development. The major agriculture groups, Waterways Council, the AWO and MARC 2000 have all been trying to get Congress to enact a WRDA bill to begin the effort to have these locks replaced. For years the commercial towing industry has been funding 50% of the cost for this type of needed construction. Congress needs to pass the WRDA bill.

MN: What are some emerging trends in the industry?

Mauer: There has recently been a significant increase in the cost of transportation, as well as increased congestion, on our rail and highway systems. The increase in transportation costs and congestion on the highways has many companies looking to the inland waterways as an alternative route for moving their products. As a method of transportation, water-borne transportation is less expensive than movement by rail and truck. To make barge transportation efficient, you need to transport products in large quantities. There is an emerging trend for transportation companies to evaluate the transport of products in smaller quantities on the inland river system. Even with the inefficiencies of moving a less-than-full barge, moving these other products by barge remains more cost efficient than moving them by truck and rail. I have also seen a trend by companies to evaluate barge designs, which are different from standard designs. These new designs will allow the transport of an even greater range of products in the future. It is important to note that the success of these innovative initiatives will be in jeopardy without investment back into the inland waterways infrastructure.

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