Director of the Port of Oakland. I appreciate the opportunity to
appear before your Subcommittee today, and offer my thanks to you
for focusing on the subject of ports and the impact of the
dredging crisis on ports and our intermodal transportation
system. In addition to my capacity as Executive Director of the
Port of Oakland, I also appear today on behalf of the American
Association of Port Authorities. I co-chair the Dredging Caucus
formed within AAPA, along with Lillian Liburdi from the Port of
New York and New Jersey. The Dredging Caucus was formed about a
year ago, with a mandate to push for legislative and regulatory
reforms that would address, and hopefully resolve, the dredging
crisis. There are over forty U.S. ports that are members of the
Dredging Caucus.

DREDGING 18 DISPOSAL

Mr. Chairman, in recent years, the federal government
and port facilities have found it increasingly difficult to
proceed with dredging operations, primarily due to the
controversy surrounding disposal of dredge material. As a
result, ports and the U.S. Army Corps of Engineers have faced
months and even years of delays in beginning harbor deepening
projects as well as maintenance dredging of both federal



59



- 2 -

navigation channels and berths. This has adversely impacted
ports on all U.S. coasts, and the entire maritime industry.
Ports such as New York, Boston, Baltimore, Savannah and the Port
of Miami River on the East Coast; Los Angeles, Long Beach,
Oakland, Tacoma and Seattle on the West Coast; New Orleans and
Houston in the Gulf; and Toledo and Duluth in the Great Lakes all
have experienced delays in beginning either deepening or
maintenance dredging projects. Furthermore, all of these ports,
as well as many more, have future maintenance or deepening
projects, the success of which will depend on the expediency of
permit approval. The bottom line is that today, dredging is
disposal. Ports' dredging projects have been prevented or
delayed because of environmental concerns over disposal of the
dredge material. Too often, the frequently distorted
"environmental consequences" of dredging receive attention while
the economic consequences of not dredging, i.e. the impacts on
trade and employment as they relate to local, national and world
economies, receive little focus.

Dredging isn't simply removing silt and sand from the
bottom of harbors. It's preserving and creating the kind of
jobs, and generating the type of wages, taxes and other economic
benefits that the Clinton Administration and Congress are working
so hard to provide. Yet sadly, this is not happening at many of
our Nation's ports. I am holding a stack of trade press articles
and editorials from just the past few months. Mr. Chairman, with
your permission, I would like to enter these into the record.



60



- 3 -

Let me read just a few headlines — "New York - New Jersey
Dredging Woes Could Force Ships Out"; "Channel Access Problem In
Boston Delays Boxship"; "Missed Call Spurs Demand To Speed Boston
Dredging"; "Port of Providence Scurries to Dredge Its Choked
Channel"; "Dredging Delays Prove Costly For Richmond, Virginia
Port Interests"; "Inability to Dredge Forces Firms To Improvise
to Get Ships to Berths". The problem is serious, it is Nation-
wide, and it must be solved this year.

LOST JOBS AND ECONOMIC ACTIVITY

Let me give you an example of the economic impact from
the lack of dredging. West Coast shipping activity is booming
because of the growth of trade with the near and far East, and
the development of efficient intermodal systems to move cargo to
and from the interior and eastern regions of our country. Yet
the San Francisco Bay Area ports have experienced a substantial
drop in the share of West Coast containerized tonnage that they
handle. The reason is the lack of adequate channel depth to
accommodate the new generation of containerships. The Bay Area's
share of this tonnage has dropped from approximately 28% in 1980
to approximately 17% today. If the Bay Area ha(? retained its 28%
share, there would be substantially more jobs available for
citizens of the area today, as a direct and indirect benefit of
shipping activity. We estimate that there would be approximately
4,500 more Bay Area jobs today directly related to shipping
activity, with an estimated payroll of $150 million. If one also
considers the jobs created indirectly, the figure would be



61



- 4 -

approximately 6,500 jobs, with additional business revenue of
approximately $550 million annually. Further, if one was to
consider an even more expansive definition of "indirect" jobs
created by the Bay Area maritime activity — the Hewlett-Packard
technician, the people who build Toyotas at the nearby NUMMI
plant, the Toyota salesman, the farmer in the Sacramento valley
— the number of jobs is literally in the tens of thousands, and
payroll and tax figures in the hundreds of millions of dollars.

8TAT0S REPORT

The good news, Mr. Chairman, is that two years ago we
were able tc complete Phase I of our channel deepening project,
which took our inner harbor down to -38 feet. It took twenty
(20) years to get to the point of starting this project.
Further, the second phase of our dredging project, which will
take both our inner and outer harbor down to -42 feet, will begin
in December. This required a united effort on the part of
industry, labor and even environmental interests; it took the
leadership and cooperation of our Congressional delegation and
the federal, state and local regulatory agencies. And in the
case of our upcoming -4 2 foot project, it took the intervention
of the President of the United States.

But there is also bad news. The bad news is that in
the Bay Area and around the country, other deepening projects
continue to experience delays. Even more ominous is the issue of
maintenance dredging, and the question over where to dispose of



81-949 0-94-3



62



- 5 -

maintenance material and who should pay for it. To me, this is a
looming crisis which has only begun to surface, and deeply
threatens the efficient operation and safe navigation at every
port in this country. Over 90 percent of the nation's top ports
require regular maintenance dredging. Together, they move nearly
93 percent of all U.S. waterborne commerce annually, yet many
ports have suffered severe delays in performing maintenance
dredging.

The issue is this — the Water Resources Development
Act of 1986 established for new construction a cost sharing
requirement between the local sponsor of a dredging project and
the Corps of Engineers. This was based upon the concept that
navigation projects have both a local and national benefit.
Speaking generally, if the dredge material for new construction
is disposed of in a water site, it is cost shared. If any
material is disposed of at "upland" or confined disposal
facilities, the local sponsor pays 100%. However, for
maintenance dredging of federal channels, the Corps of Engineers
has 100% responsibility, again, due to the national benefit of
waterborne commerce activities. But WRDA '86 does not mention
who should pay for the disposal of maintenance material from
federal channels that needs to go upland or to a CDF.

The Corps has taken the position that they do not have
the authority to pay for upland disposal of maintenance material,
and perhaps, their interpretation of the current law is not



63



- 6 -

without foundation. But as sediment standards become more
strict, and as scientific testing procedures become more
sophisticated, there will be more and more material, both new
material and maintenance, that will need to go upland. Ports
simply will not be able to afford the costs of dredge material
disposal.

The injustice lies in the fact that, to the extent
contaminants are present in dredge material which make it not
suitable for unconfined aquatic disposal, these contaminants are
usually not the result of port related activities. Rather, they
are from traditional point and non-point sources far from the
navigational channels. The regulatory efforts seems to be
directed toward the symptom — dredging — rather than at the
source of the problem, the original discharge. This misdirection
of efforts does not benefit the environment, although it does
hurt the economy.

NATIONAL DREDGING POLICY

If the dredging gridlock is to be broken, federal
legislation and regulatoiry changes this year presents the best,
and perhaps only, hope for success. The President of the United
States cannot, nor should not, have to intervene in every
dredging debate. Over the past year, the public port community
as been active in seeking legislative and regulatory changes that
will enable dredging projects to be approved expeditiously, while
still allowing the work to be accomplished in a cost-effective



64



- 7 -

and environmentally sound manner. To that end, we have called
for the adoption of a "National Dredging Policy" which would
include both legislative and regulatory changes. I have
submitted a summary of this proposal with my written testimony.

The policy indicates the need for changes to the Clean
Water Act and Water Resources Development Act. The changes to
the Clean Water Act would remove dredging from Section 404 and
develop a new section exclusively for the control of dredging.
This section would establish three categories for dredging
material and set up time limits for developing the categories and
issuance of permits.

The changes that the National Dredging Policy would add
to the Water Resources Development Act deal with cost sharing for
all disposal methods. In other words, the present 25%/75% cost
sharing for water disposal would also apply to restricted water
disposal and upland sites. The same sort of cost sharing would
apply when dredged material is used for beneficial uses such as
wetland development and beach nourishment. Further, we suggest
amending the Water Resources Development Act to require the Corps
to fund all maintenance dredging projects for any disposal
method, i.e., water disposal, confined water disposal and upland
disposal. We are currently developing proposed language which we
will recommend for inclusion in the Water Resources Development
Act.



65



- 8 -

We applaud the fine work of the Inter-agency Working
Group on the dredging process that was established last year,
which is considering our recommendations. I don't know if I've
ever seen a group of agencies make one, let alone two, sets of
"outreach" visits across the country to discuss an issue. It's
refreshing and we appreciate their efforts.

C0NCLD8I0N

Mr. Chairman, over the past twenty years, I, along with
my colleagues in this industry, have seen the dredging problem
grow to the crisis that it now is. Yet despite the past several
years filled with hardship and heartache, experiencing the
economic loss and suffering from inhibited growth, we are
optimistic. We are optimistic because we feel that we are making
progress for the first time. Your hearing today has taken us a
long way toward reaching our goal, and we are very appreciative.
Yet I add this final admonition — the Clean Water Act and Water
Resources Development Act must be passed this year, and each bill
must address this problem. Otherwise, I fear we will lose the
focus that we currently have, and thus our window of opportunity
for solving the dredging crisis.

Again, thank you, and I will be happy to answer any
questions.



66



TESTIMONY

of

John M. Loftus

Seaport Director, Toledo-Lucas County Port Authority



to



Subcommittee on Merchant Marines

House Committee on Merchant Marine and Fisheries

June 16,1994



I would like to thank you Mr. Chairman, and Members of the Subcommittee, for allowing me to testify
today on the very important issue of dredging and its impact on port competitiveness.

I am John Loftus, the Seaport Director for the Toledo-Lucas County Port Authority. Today, at the
request of Mr. Kenneth Szallai, the Port Director of Milwaukee and Chairman of the American Great
Lakes Ports, I am also representing the views of that organization.

I have been responsible for ongoing maintenance dredging at the port of Toledo since coming to Toledo
in 1 985. Prior to that, I worked on dredging issues while serving on the Staff of Senator John Glenn.
In that role, I had the privilege of working with several other House and Senate staff members on the
cost sharing formula enacted in the 1 986 Water Resources Development Act. As a result, I became
aware then, and even more since, of the impact of dredging and cost recovery on the competitiveness
of the Great Lakes/St. Lawrence Seaway System.

Let me begin by stating just how important dredging is the Great Lakes ports. It is not just a maner
of competitiveness, IT IS A MATTER OF SURVIVAL!!! Many of our fellow ports on other Coasts, have
options of dredging deeper in order to enhance their competitive position. By going deeper these ports
can attract the larger colliers and bulkers to carry coal and grain to and from their ports. Great Lakes
Ports do not enjoy this luxury. The Great Lakes are limited to 26 feet 3 inches of draft for ocean going
vessels. That's it! We cannot go deeper due to the limits imposed by the locks on the St. Lawrence

1



67



Seaway System. Depth for the intra-Lakes trade (those cargoes not transiting the Weliand Canal) enjoy
slightly deeper draft of 27 feet. But the fact remains, the Great Lakes ports do not have the option
of considering 55, 45, or even 35 feet of draft. We are stuck with what we have.

In the Great Lakes, if my port or any other port for that maner is not dredged, for whatever reason,
vessels will not just lighten their load, they will not come at all. If Toledo cannot accommodate 26 feet
of draft then a vessel will go to Detroit or Cleveland. If Chicago has a draft problem, the vessel will
sail to Milwaukee or Burns Harbor. What is unique to our coastal range is that the whole Great
Lakes/St. Lawrence Seaway system must be maintained throughout at appropriate depth. If the
system is not maintained, vessels will not even enter the system; they will discharge their cargo in
Montreal or other eastern ports outside the system. That is why dredging Is needed for SURVIVAL,
not only at our individual Great Lakes ports, but for our whole system.

Some other aspects of the relationship of dredging to the competitiveness of American Great Lakes
ports also should be noted. Assuming the dredging is maintained at 27 feet so we can survive, there
still is the impact of the tax used to pay for it. The harbor maintenance tax was adopted in 1 986 to
pay for 40% of the Army Corps of Engineers Operations and Maintenance budget, though concerns
were expressed at the time about its negative impact on U.S. exports. Only four years later. Congress

more than tripled this tax burden to 125%, and its substantial revenues in excess of what the
Engineers spend on our maintenance dredging now just go into the general Treasury fund.

Anyone who doubts what maritime trade taxes such as these do to U.S. export competitiveness should
check with American shippers. Grain Is a major export from Toledo, and my grain people tell me that
]ust a few cents a bushel can make the difference in the world markets as to whether the sale goes
to an American or a foreign supplier. We in the Great Lakes, of course, have the added disadvantage



68



of diversion of our cargoes through nearby Canadian ports with whom we are in direct competition,
since they pay no harbor maintenance tax for their dredging. We ask that Congress show more
awareness of the need for competitiveness in U.S. maritime trade, and specifically that it cap the
harbor maintenance tax and roll it back to the originally agreed level.

Ports have argued for some time that dredging, especially on the Great Lakes where the material is
placed in confined disposal facilities, actually helps clean the aquatic habitat, not defile it. Moreover,
other important environmental issues are at stake. Water transponation is the most energy-efficient
means of moving product. It is also the least congestive and the safest. A recent study by the Great
Lakes Commission provides some dramatic findings on consumption and contaminant emissions in
comparing water, rail or highway transportation [see Attachment 1|. Let me cite three of the 11
scenarios explored: (1) taconite movements from Minnesota to Nonhern Ohio; (2) Steel from
Rotterdam to Cleveland (comparing an all-water movement to Cleveland as opposed to a water/rail
movement through Baltimore); and (31 wood pulp from Thunder Bay, Ontario to Superior, Wisconsin.
This last example has special significance.

In the case of taconite movements, water transportation consumed 60% of the fuel that rail would
have required in either case, and produced only 47% of the emissions. Steel movements to Cleveland
were not as significant, because so much of the movement would involve water transportation, but
the results did show the all-water move would consume 88% of the fuel and produce only 90% of the
emissions.

The pulp movement from Thunder Bay to Superior provides an outstanding example. In this case, the
water route consumed only 57% of the fuel and produced only 62% of the emissions. Unfortunately,
the harbor maintenance tax increase of 1 990 damaged the competitiveness of the marine mode on this
run: The Incan-Superior , a Thunder Bay-Superior rail car ferry, was forced out of business. The vessel



69



now serves ports in Western Canada, where there is no harbor maintenance tax, and the pulp
movement now goes overland.

The Commission study shows even greater energy and emission benefits, for marine, when compared
to highway movements. Other advantages of water movements include fewer tires for disposal in
landfills, less congestion in urban areas, and enhanced safety for the public.

Any way one wishes to measure it, the cost benefits to the nation of adequate dredging are immense.
I have just mentioned the environmental advantages of waterborne carriage as compared with the
energy and emissions impact of competing modes.

The economic impact for an area such as the Great Lakes is almost beyond calculation. We have the
core of the American steel industry. We have the nation's auto manufacturing capital. We are a great
agricultural region. Marine transport is imponant to them all. How would these industries fare if our
ports shut down for lack of dredging? To say the least, there would be severe dislocations and
impairment to untold numbers of workers and businesses.

The Seaway system itself, handling international trade, generates billions of dollars of economic activity
on the U.S. side, as well as Canada. According to a 1992 study commissioned by the St. Lawrence
Seaway Development Corporation [see Attachment 21, the Great Lakes/Seaway trade alone is
responsible for 44,000 U.S. jobs in the region. What value do we place on those jobs? When I am
in Toledo I like to use the example of the local Jeep plant, the area's largest employer. When
describing the significance of a threat to 44,000 jobs, I usually tell the people in Toledo, it is the
equivalent of losing 8 Jeep plants. In this day and age, as we all watch states bid against each other
for auto assembly plants, we can each do the calculations as to the significance of these jobs.



70



What is the basic problem causing today's dredging crisis? In simple terms, the problem Is the lack
of clearly defined rules. The dredging cost-sharing formulas adopted by Congress have different
requirements, depending on whether the dredging involves a new project, maintenance dredging, or
environmental standards. Depending upon how the bureaucracy interprets the law of the specific case,
waterborne transportation will be forced to pay additional costs. Three examples come to mind
involving Great Lakes projects in Duluth, Milwaukee and Toledo. Each is a different situation, but all
involve bureaucratic interpretation of the rules and excessive costs, as a result.

The situation involving Duluth was brought before this Committee in the past. It involves a project that
dates back over 30 years which would have deepened the Federal Channel further up the River. Due
to the lengthy process involved with a Corps project, the Duluth improvement was only recently ready
to go to construction. The project was scaled back substantially and due to the passage of time was
now governed by cost sharing as established by WRDA 86. My colleagues in Duluth understood this
but felt the project was imponant enough to move forward. In order to meet the local cost
requirements, port officials knew they must seek a special appropriation from the State legislature.
Before undertaking such an effort the poa sought the absolute last word on the project cost and the
local share. After assurances from the Corps on the local cost, the port staff, through much effort,
was able to secure the special appropriation from the State. Within 2 months, the Corps notified the
port that the local share was revised up by nearly 30%.

The second example involves maintenance dredging in Milwaukee. As you are well aware, the Clean
Water Act provided for the construction of confined disposal facilities (CDFs) to retain dredge material
removed from harbors on the Great Lakes. This was done in an effort to remove contaminated
sediment from the aquatic habitat of the Great Lakes. When WRDA 86 was passed, it was the port's
understanding that the Harbor Maintenance fee would pay for maintenance dredging, including new
CDFs. Unfortunately, in the case of Milwaukee, the Corps is defining the construction of CDFs as a



71



new project with cost sharing required WRDA 86 envisioned cost sharing for projects that would
provide new opportunities and additional revenues to nneet cost sharing requirements. Ongoing
maintenance dredging does not provide additional revenues to meet these cost sharing requirements.

The last example, and one near and dear to my heart, is the controversy surrounding the Corps' dredge
disposal practice in Toledo, Ohio. This Issue arose shortly before I began working at the Port Authority
and has been a constant irritant for the past 9 years. This issue involves the State of Ohio's
responsibilities under section 401 of the Clean Water Act and the Corps' responsibilities under section
404 According to section 401, the state is required to set water quality criteria which is submitted
to the U.S. EPA for approval. When approved by the U.S. EPA, the state is responsible for enforcing
what amounts to Federal standards. The Corps, on the other hand, is responsible for establishing
disposal criteria under section 404, which is also submitted to U.S. EPA for approval. In the case of
Toledo, the Corps' 404 disposal practice violated the State's 401 water quality criteria. The Corps is
willing to comply with the State's requirements only under the condition that any additional cost
associated with such practice would be paid by the local sponsor, i.e. the port.

The difficulty here is that the Corps argues that the state's requirements exceed those of the Federal
Government. The Port and state have argued that the 401 standards are required by the Clean Water
Act and approved by the U.S. EPA and are Federal standards. Earlier this year, a letter was sent from
the Corps' Buffalo District office to U.S. EPA, Region V requesting clarification on this issue of state
standards being more stringent than Corps requirements. The response was less than clear (see
attachment 3). Let me quote from the Region 5 response:

"There is no such thing as a "more" stringent State Water Quality
Standard since there is no such thing as a Federal Water Quality
Standard, in the specific sense In which you appear to utilize ttiat



72



term in your letter. The term "Federal Standard" is used in your
letter in the sense of "Federal Water Quality Criteria." Federal Water
Quality Criteria are advisory in nature, and they were developed by
our Agency in response to Section 304 of the Clean Water Act which
states may use in developing their Water Quality Standards. A State
may adopt more stringent water quality criteria as part of its Water
Quality Standards pursuant to section 510 of the Clean Water Act.
Since State 401 certification is based on State Water Quality Standards,
including water quality criteria, EPA has no authority to object to more
stringent State Water Quality Criteria or a certification based on them."

The EPA in this case failed miserably in answering the question. Instead the EPA is willing to allow