Washington Insider - Friday

Corps and the Olmstead Problem

Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.

Russia Likely to Boost Agricultural Subsidies

Following Russia's ban on Western farm goods, the country's Agriculture Ministry says the farm sector will need an additional $18.3 billion in state support to help boost production and reduce dependence on imports over the coming five years. This would be in addition to the $44.2 billion in state support that already is in Russia's federal and regional budgets.

Agriculture Minister Nikolai Fyodor stressed that Russia would comply with its commitments as a member of the World Trade Organization by increasing "green box" rather than "amber box" support measures.

As a WTO member, Russia is committed to limiting amber box support –– which covers trade distorting measures –– to less than $4.4 billion by 2017. Fyodor said additional funds would instead by targeted at non-distorting green box measures such as infrastructure projects, wholesale and logistics centers, breeding and genetic centers, innovation, organization of domestic food aid and assistance to regions less favored to agriculture.

The immediate need for additional money for the agriculture sector is yet another demonstration that Western sanctions are taking a bite out of the Russian economy, even if some sanctions achieve their goals in less direct fashion than others.

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Trash Burning Found to be a Major Source of Poor Air Quality

Researchers have found another significant source of air pollution that heretofore has gone unreported and unmeasured: the open-air burning of trash. A new study by the National Center for Atmospheric Research reports that more than 40% of the garbage discarded globally is disposed of by unregulated, open-air burning.

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The report noted that open-pit burning of trash releases particulates, carbon monoxide and mercury into the atmosphere and also contributes greenhouse gases that worsen the effects of climate change. Trash burning is especially prevalent in the developing world, where there are fewer landfills and incinerators.

Trash burning is unlikely to be reported to national environmental agencies and therefore is excluded from national air pollution inventories, meaning harmful air pollution is probably much higher than estimated in many of the nations. Those emissions are also not factored into environmental policies, according to the study.

The report makes no recommendations regarding alternative ways for people to dispose of trash, although it does hint that landfills commercial incinerators would be better environmentally.

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Washington Insider: Corps and the Olmstead Problem

The Army Corps of Engineers is the basic keeper of the nation's waterways. That is an often unpopular role, however, because while the Corps' skill at building and managing massive structures is undoubted, it is heavily and frequently criticized for the total amounts of money it spends, for its enormous cost overruns and for the effects its structures sometimes have on the natural environment.

In addition, the Corps has gotten itself into something of a jam over its largest-ever construction project on the Ohio River at Olmstead, Ill. The project has become fairly ancient now, since it was first authorized by Congress in 1988. In addition, it has taken on the aura of a white elephant as its cost ballooned from the original $775 million to nearly $3 billion. Perhaps worst of all, it is more than two decades behind schedule.

Part of the heat the corps faces over the project is from stuff the Corps likes but critics often hate. For example, it points to its "experimental technology" which critics say has not always gone well — and, may never be used again. Also controversial is the decision to fabricate one-of-a-kind heavy-lift cranes that crawl on land and float on a barge, and its decision to construct elements on land and move them into place, including concrete pieces that weigh as much as 9.9 million pounds.

So, in a recent report, the New York Times wheels out the "too big to fail" cliché but it is not clear that it is appropriate here. Beyond the headlines, the Times seems to say that several presidents and congressional leaders saw the project as essential to replace two deteriorating locks on the busiest section of the Ohio River that were hugely expensive bottlenecks for valuable river traffic. But, it is true, the project is big.

The budget squeeze evolved because as the project grew, almost all of the $75 to $80 million annual revenue for the inland waterways trust fund (matched by the Treasury) was absorbed by construction expenses at Olmsted, leaving no money to be spent on the $8 billion in backlogged Corps projects to update the aging inland water infrastructure. This has become acute because as the project dragged on and on, all but a handful of the 20 major locks and dams on the Ohio have exceeded their 50-year design life.

A major part of the Olmstead story now is that some of the Corps' budget pressure was relieved in June when Congress approved, and the president signed, a new $12.3 billion water resources bill that includes funds to complete Olmsted construction and provide more than $100 million more annually for other waterway projects that have been languishing.

The June agreement united waterway users like the towboat operators and inland waterway shippers and was long overdue, Marty Hettel told the Times. Hettel chairs the Inland Waterways Users Board, a congressionally authorized advisory group, and is senior manager of waterway regulatory programs at AEP River Operations, one the country's largest shippers.

Hettel emphasized the fragility of the recent political deal and the pressure still building on the Corps. "You have to remember that when this project started it was supposed to cost $775 million," he said. "That isn't quite the way things turned out. We've got other locks that are failing and hurting the efficiency of the water transport system. We really haven't been able to do much about it until this new bill. The quicker the other projects get started and completed the better for the nation. It lowers transportation costs."

So, the true story of Olmstead now seems to be that the project may yet be an engineering triumph, and Congress seems to have chipped in with some badly needed investment in our deteriorating transportation infrastructure. However, the Corps still faces criticism for generating cost estimates it cannot meet and time schedules that seem to have been generated with the help of substances that until recently were closely controlled.

The transportation system, including our waterways, is central to provide access to the growing overseas markets for U.S. products and much more rebuilding beyond that at Olmstead is badly needed, as well, experts say. And, it is not clear that the budget bullet has been finally dodged at Olmstead, since so much work remains to be done there and across the rest of the system.

As Mr. Hettel says, the political support for transportation remains fragile, and the project at Olmstead deserves close attention as it continues, Washington Insider believes.


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