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OMB Adds $8 Million To Ouachita '05 Budget Request

The Office of Management and Budget (OMB) has revised its fiscal year 2005 budget request for the Ouachita and Black Rivers project by adding $8 million for operation and maintenance to support navigation on this navigation system in Arkansas and Louisiana. The revision was made on May 12, following an April 29 hearing by the Arkansas Legislature, in which stakeholders described the catastrophic consequences that would accrue to the region if navigation on this waterway were not maintained.

The previous Administration budget included $1.974 million to support recreation, but no navigation funding. The total request for the project is now $9.974 million. Allowing for offsets from other allocations, this amendment increases the FY 2005 outlays by $4.5 million.

OMB stated that the increase was fully offset by re-allocating funds within the Operation and Maintenance (O&M) account (-$3 million) and by a proposed reduction to the Department of the Interior's Indian Land Consolidation account (-$5 million.)

The proposed $3 million re-allocation in the O&M account would be derived from a decrease in maintenance for recreation (-$1 million) and bank erosion control (-$2 million) from the J. Bennett Johnston Waterway project in Louisiana.

"These activities have a lower priority for implementation in FY 2005 and therefore would be deferred," stated the amendment.

Summary of April 29 Testimony in Arkansas Legislature
“Catastrophic job loss and far reaching economic and environmental disruption to south Arkansas and northeast Louisiana will result from failure to fund Corps of Engineers' operations and maintenance of the Ouachita/Black River Navigation System. An approximately $8 million savings to the Army Corps of Engineers would result in a net loss in tax revenue to the federal treasury.”

The above summarizes the consensus of more than two dozen representatives of city, county and state government, business and industry who testified in support of continued funding of the Ouachita/Black River Navigation System during a meeting of the Arkansas Legislature's House and Senate Interim Committees on Agriculture, Forestry & Economic Development, April 29, 2004 in Camden, Arkansas. The hearing was attended by 150 participants.
The 336-mile long Ouachita/Black River Navigation System, that includes 117 miles in Arkansas, is facing an $8.2 million funding cut in the proposed 2005 budget that begins in October, 2004. The budget proposal of $1.9 million budget for recreation on the system will not only eliminate maintenance on the system's four locks and dams, two of which are in Arkansas, but will prohibit their operation, thus eliminating navigation on the waterway. This also puts many of the other economic, environmental and recreational activities supported by the river system in jeopardy.

The waterway was targeted for a budget cut because it falls into a category of waterway considered by the federal Office of Management and Budget as "low-use." OMB considers waterways low-use if cargo shipped on the system is less than 1 billion ton-miles annually. The Ouachita/Black River Navigation system had more than 800 million ton miles of usage in 2001. Other economic factors or benefits of waterways projects are not considered in the "low use" definition.

A representative from Arkansas Governor Mike Huckabee's office and congressional staff members from the Arkansas delegation presented statements in support of continued funding of the waterway at current levels. Their concerns have been expressed to the president and appropriate committees in the U.S. Congress.

Reduction in the funding of the river system has much broader consequences than simply the loss of navigation. The river has become a source of economic development, jobs, power and water supply as well as recreation. Considerable investments by private businesses and governments to harness the resources of the river were made with the assurances that it would continue to be available for use.

Before any decision to close or change the operation of the Ouachita/Black River Navigation System is made, a thorough study should be made to identify long term environmental, social, economic and hydraulic impacts.
The modern day history of the Ouachita River begins with settlements at Monroe, Louisiana and Camden, Arkansas in 1783. More than $700 million was invested in construction of the four locks and dams.

Colonel Rick Clapp, commander of the U.S. Army Corps of Engineers, Vicksburg District, said the Vicksburg District is capable of using as much as $18 million annually on the river system for operations and maintenance. Clapp said the district is evaluating possible reduced operation alternatives if the Ouachita River receives only the $1.9 million as proposed in the 2005 budget.

He anticipated that in that case, the lock gates would be shut and the locks would cease operation on October 1, 2004. The dam gates would be positioned and most of the project staff would be moved or furloughed. Minimum staff would remain for safety and security purposes. Clapp speculated that the budget would be used for these minimum activities and to initiate a study that would identify long term environmental, social, economic and flood control impacts of project closure. No studies have been done on the impact of closing the Ouachita/Black River Navigation System.

Clapp said that if the project were put into caretaker status, meaning the locks closed and dam gates set with minimal maintenance performed, there could be deterioration on the project that could take significant funds to put it back into operation at a later date.

Loss of Navigation
Closure of the locks on the river system would eliminate navigation and significantly affect the area's industry and economy.

Denny McConathy, owner of Cross Oil Refining in Smackover, Arkansas, testified that his company, in business since 1923, uses the river to bring oil via barge from Louisiana and Texas gulf coasts to make products that go into a variety of oils, adhesives, metal working fluids, rubber compounds and other materials.

Last year the company brought 79 barges of oil up the river and expects to bring up more than 100 barges this year. That oil is valued at more than $68 million. It would take more than 11,000 trucks to transport that volume- a task that would be physically and logistically impossible as well as economically prohibitive.

Cross Oil has more than 500 customers, and projects 2004 sales of between $125 million and $150 million. Cross Oil employs 125 people, has an annual payroll of $6.5 million. The majority of employees live within 25 miles of the plant. In 2003, the company paid property taxes of more then $350,000 to Union and Ouachita Counties. Of that, $290,000 funded the Smackover school system and more than $16,000 was paid to the city of Smackover.

Investments the company has made in its facilities were made with assurances that the Ouachita River would be available for use. Loss of the use of the river threatens the company's existence and the local economy. In 1995 the company invested more than $47 million in the refinery, packaging plant and river terminal, and a $2 million expansion of the lube oil packaging plant that is underway, with completion expected by July. Local companies performed all the expansion work. In addition, the company has 970 accounts-payable vendors, most within 100 miles of the plant, who were paid approximately $100 million in 2003.

"Cross alone puts enough money back into our government in the form of payroll taxes, employee income taxes, income taxes, etc., to more than pay for the costs of maintaining the navigation system," McConathy wrote in a letter to the Arkansas Waterways Commission.

Keith Garrison, executive director of the Arkansas Waterways Commission, said that waterborne transportation has a significant economic impact in Arkansas. A 2002 report by the Mack Blackwell Center for Rural Transportation concluded that waterborne transportation had an $811 million annual economic impact on the state. He emphasized the efficiency of barge transportation, pointing out that one barge can carry the equivalent of 60 semi-trucks or 15 freight cars. It would take an additional 40 million trucks on our nation's highways or 10 million rail cars to carry what is not carried on our inland waterways, he said.

Garrison said that cuts in funding to the Corps of Engineers budgets for navigation maintenance have been going on for more than 12 years, while repair and maintenance needs have steadily increased.

With freight movements predicted to double to 12 billion tons by 2015, the use of the waterways will even more important. More than 70 percent of freight moves by truck. Without increased use of our waterways, the U.S. would have to more than double the interstate highway miles available to meet that demand.

Paul Revis, executive director of the Ouachita River Valley Association, emphasized that the river's four locks and dams are critical to the operations on the river system. Maintenance work is 20 years behind schedule because of continued budget cuts to the Corps of Engineers. International competitors like Europe, China and Brazil have recognized the value of their inland waterways and are investing more money in them while the U.S. is cutting waterways budgets, making the U.S. less competitive. He said that benefits used for authorizing a project are frequently different from those needed to keep it open, referring to the impact the river has on industry and the economy in the area beyond its intended navigation benefits.

Waterway Increases Farm Income
Doug McNeely of Bunge North America, said his company is part of the world's largest processor of grains and oil seeds. It operates in 19 states on the Mississippi River and its tributaries. Bunge employs 100 people at 13 facilities in Arkansas, and 250 people in 14 locations in Louisiana. McNeely manages two grain elevators on the Ouachita River in Louisiana. These elevators purchase soybeans, corn, wheat, and sorghum from 400 local farmers. In a half-century of presence on the river, the use of waterways to move grain has significantly increased farm income, he said. Any decision by the federal government to abandon its investments in rivers like the Ouachita and Black will be immediately felt in the pocketbooks of local farmers and communities, McNeely continued. His company estimates that loss of river transportation for the grain and soybeans shipped by these facilities would add transportation costs, and decrease prices paid to farmers by approximately 14 cents per bushel. This could mean a loss to farmers of $1.4 million each year.

Greg Richardson of the Louisiana Port of Columbia, about 25 miles south Monroe, Louisiana on the Ouachita River, said public ports in Louisiana contribute $33 billion to state's economy each year, and create 270,000 jobs. He said that the volume of tonnage has always been a problem on the Ouachita River system and that this funding battle is fought every year. Richardson emphasized the need to actively fund the river system to make it more user-friendly.

Ouachita Terminals is working to develop, construct and operate an intermodal/multimodal containerized cargo facility in West Monroe, Louisiana. With the continuance of the Ouachita's nine-foot navigation channel, Ouachita Terminals believes the facility has the potential to bring in enough cargo to end the future concerns over the ton mile criterion used for funding the river system.
In addition, representatives from Davidson Terminals and Sunshine Oil Company; Tressenderlo Davison Chemical LLC; Louisiana Oil Marketing Association; West Monroe, Louisiana Port; Placid Oil & Refinery; Valero Petroleum; Tensas Basin Levee District; and Petron, Inc. presented oral or written testimony outlining their concerns about the effects that would result from the inability to use the Ouachita River for navigation.

Loss of Navigation Pools
Closing of the Ouachita/Black River Navigation system presents not only a challenge for navigation, but also threatens industry and economic development as well as the economy of south Arkansas and northeast Louisiana. Although the system was built as a navigation project, over its more than 100-year history, the river's resources have been used to provide water to local communities as well as a benefit to industry. Any changes to how the river is operated and maintained has the potential to change the quality and quantity of pools of water formed between the locks. These pools of water have served as the life-blood of many cities and industries. In addition, without the ability to use the waters of the river, restrictions on the use of the ground water of the already-stressed Sparta Aquifer would have to be put into place to insure the area would have a viable water supply in the future.

Importance of the Sparta Aquifer
Pete Parks, vice chairman of the El Dorado Water and Wastewater Commission and Ken Rudder, vice president of the Union County Water Conservation Board said El Dorado and Union County have invested $6.8 million over the past five years to develop the Ouachita River as an alternative water source. The Sparta Aquifer, which provides potable water to areas along the Ouachita River and in Louisiana, is in a critical ground water area. Water from the Sparta Aquifer is being used faster than it can be replenished. The entire project will cost more than $67 million and area businesses have invested millions of dollars more in water conservation measures, in addition to donations of land and right-of-ways for facilities. In addition, Union County is working on a multi-million-dollar project with several area companies to return treated discharge water into the Ouachita River. The great pools of water available now allow for dilution. If the water would have to be further treated to meet EPA and ADEQ standards, additional millions of dollars would have to be spent by El Dorado and Union County. This could possibly result in the closure of two El Dorado plants.

In deciding to use the Ouachita River for its water source, the Union County Water Board explored every other option to come up with a water supply. This included looking at creeks and hollows to build a dam to create a lake for water, which was not possible, because the necessary water resources in that part of the state do not exist. The river was the best, most economical and viable source of water.

Georgia-Pacific Corporation, which operates seven facilities along the river in Arkansas, provides more than $2 billion to the economy of Arkansas along with more than 3200 jobs. These plants and jobs would be threatened if Georgia-Pacific could not use the Ouachita River for its operations.

The Arkansas Electric Cooperatives use the Ouachita River to both run a power generating station near Camden and receive the fuel oil used at the facility.

The plant uses river water for power generation. The pool levels maintained as part of the navigation system are vital for allowing the plant to generate, especially during periods of low river flow and high temperatures, when electrical demand is peak. If the pool level were no longer maintained, the plant may be forced to discontinue operation during these periods due to operational concerns and environmental restraints. This would cause not only an impact on the electrical system in the area, but could result in a loss of jobs and a blow to the local economy.
Mark Bowles, environmental support manager for Entergy Services, Inc. said two Entergy power plants located in Monroe, Louisiana rely heavily on a dependable water supply from the Ouachita River as cooling water for the power production process. The company's Sterlington plant uses its river intake system to take in approximately 1.5 million gallons of river water per day. Both plants were built along the Ouachita River in the 1950's and early 1960's with the belief that there would be an adequate and dependable supply of water to meet the area's electricity demands. The loss of pool elevation along the Ouachita River would require modifications to the intake facilities that would cost several million dollars at each plant. These costs would be passed along to ratepayers. The loss of minimum river levels would close operations at both plants, and make future operations of these plants at a reasonable cost unlikely. Loss of these plants would impact Entergy's ability to provide low cost power to customers, especially during the peak electricity demand in the summer months.

Todd Fugitt, of the Arkansas Soil and Water Conservation Commission, testified that a budget cut in the operation and maintenance budget of the Ouachita/Black River Navigation Project would force the commission to consider water use permits and associated allocation of water from the river in south Arkansas. Budget cuts to the river system would threaten the growth and sustainable use goals of the surface water and ground water resources of all of southern Arkansas, and would impact Louisiana as well. If water from the Ouachita River could not be diverted for use, the Commission would be forced to consider regulation of groundwater to bring areas like Union County within reasonable, sustainable water use scenarios. This would mean a reduction of about 64 percent of the current ground-water use in Union County.

James Tilley, manager of Camden Water Utilities, said that the city of Camden's only source of potable drinking water has been the pools of water created by the Ouachita/Black River Navigation System. If the river system was closed and the pool elevations change, Tilley said it would be highly likely that there would be periods during the year that Camden would be unable to provide water to its customers. In 2003, Camden drew about 900 million gallons of water out of the Ouachita River to supply 6,000 domestic customers and four water associations in the surrounding area. Recently, Camden has spent more than $11 million in upgrades to the water system. The city has no alternative water source.

In addition, representatives from TECO/Union Power Station; Union County Water Board, El Dorado Chemical/Great Lakes Chemical/Lion Oil; International Paper; and the City of Monroe, Louisiana presented oral or written testimony expressing their concerns about the effects to their businesses or cities if the navigation pools on the Ouachita River were not available for use.

Environment and Recreation
The precise dollar value of changes to the environmental and recreational climate of to south Arkansas if the Ouachita/Black River Navigation System is closed are difficult to calculate.

The Arkansas Game and Fish Commission reported that the river has a high recreational value and attracts hundreds of thousands of visitors each year for fishing, boating, hunting and other recreational activities. These visitors pour millions of recreation dollars into the local economy.

In Arkansas alone, there are 37 public access areas constructed by the U.S. Army Corps of Engineers, Arkansas Game and Fish Commission and other groups on the Ouachita and Saline Rivers. Changes in the operation of the lock and dam system would make many of the rivers' boat launching sites unusable. These changes will also affect the environmental characteristics of the river and associated wetlands and overflow areas.

The Arkansas Department of Parks and Tourism reports that in 2003, travelers in the five Arkansas Counties in the Lower Ouachita River Valley spent more than $118 million, generating more than $9 million in tax revenue to state and local governments

Summary
Although theOuachita/Black River Navigation System system was built as a navigation project, its economic benefit has gone far beyond its value as a navigation system. The river has become the very life-blood of many cities, industries and recreational pursuits. Its value to the environment and as a water resource supporting the continued growth and economic vitality of south Arkansas and northeast Louisiana is beyond measure. Operation of the navigation project should not be closed, nor should it be changed, without a comprehensive study of the consequences of such actions.

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