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Industry Reactions to the Columbia-Snake River Extended Lock Outage (December 2010 - March 2011) by Dr. Ken Casavant Freight Policy Transportation Institute, June 2011

Most wheat firms in the Pacific Northwest moved the majority of their product, an average of 68.5 percent,
by rail during the lock outage. This compares to the average of 29 percent during a typical winter.

Executive Summary

The Columbia-Snake River System in the Pacific Northwest recently underwent a massive and sustained lock outage, eliminating barge transportation on much of the upper Columbia River and all of the Snake River. The impact of this loss of a major mode of transportation was significant and the impact on demands of other modes of transportation noteworthy.

The overall purpose of this report is to capture the effects on shippers, river carriers, government entities, ports and communities during the extended lock outage. The report's secondary objective is to describe the general characteristics of transportation movements by barge, rail and truck during the 15 week period lock outage between December 2010 and March 2011.

Since most shippers, carriers and industries did not have barge transportation available, these entities used two alternatives to transport commodities: rail and truck. Between December 2010 and March 2011 most products were transported by truck. This is interesting to note since most industry representatives stated prior to the lock outage that products transported normally by barge would move by rail as it is typically more inexpensive than truck. The convenience of truck in transporting goods short distances or by routes in which rail does not exist partially influenced the decision to shift more heavily to rail. Many industries, including wheat, forestry and waste sanitation, chose to send their goods to different markets during the lock outage which involved rerouting commodities to different areas, many of which were away from rail track.

Of those shippers and industries with access to the Columbia River below The Dalles Lock and Dam, a total of 377,000 tons were shipped downriver between December 10, 2010 and March 24, 2011; the tonnage shipped downriver during the lock outage decreased by 79 percent when compared to an average tonnage of 1.8 million tons for the last three winters. The commodities with the largest volume of downriver shipments, which traveled through Bonneville Lock and Dam only, were wheat; forest products, lumber, logs and woodchips; sand, gravel and stone products; and primary non-ferrous metallic products. During this time period, wheat comprised 62 percent, or 233,500 tons, of the total 377,000 tons moving below the lock outage; normally downriver movements during any time period make up at least 75 percent of shipments flowing through entire lock system.

Around 10,500 tons were shipped upriver between December 10, 2010 and March 24, 2011 through Bonneville to The Dalles area; this is a 98 percent decrease in tonnage shipped during the winter when compared to the typical 608,500 tons. The commodity with the largest volume of upriver shipments over the 15 week span was manufactured equipment and machinery. Ninety nine percent of the upriver shipments during the lock outage consisted of this commodity; manufactured equipment and machinery volumes were 250 percent above the typical 3,000 tons shipped during the winter. This surge in upriver shipments of this commodity is due to the U.S. Army Corps of Engineers' construction and assembly of lock gates and repairs. The Corps reported that during the month of February, two gate leaves constructed for The Dalles Lock and Dam originated in Portland and passed through Bonneville hence explaining the large movement of manufactured equipment and machinery during this month.

The continuation of the Pacific Northwest Wheat Case Study compared normal volumes, rates and modal choices for wheat elevators to those values during the extended lock outage. This survey allowed the authors to determine how the outage impacted wheat shipments and sales in the Pacific Northwest.

Survey results revealed that all wheat shipment volumes declined during the lock outage. Southern Washington firms experienced the greatest change; shipments decreased by 95 percent during the lock outage in this region. Eastern Oregon firms experienced a decline in shipments of only 20 percent. Northern Idaho and Southern Idaho suffered declines in shipments of 86 percent and 32 percent, respectively.

Most wheat firms in the Pacific Northwest moved the majority of their product, an average of 68.5 percent, by rail during the lock outage. This compares to the average of 29 percent during a typical winter. However, Eastern Oregon and Southern Washington firms heavily employed trucking services to transport wheat from December 2010 to March 2010, about 40 to 75 percent of shipments, respectively.

Twenty percent of wheat coming from Eastern Oregon was shipped via truck-barge. This was because of one wheat elevator's access to the Columbia River, below The Dalles Lock and Dam and the rest of the lock outage, and Bonneville Lock and Dam. This lock was open 11 weeks during the 15 week outage. On average, truck-barge rates were at least 36 cents per bushel less than rail and truck during the lock outage, as compared to at least 10 cents per bushel less during the typical year. Direct truck to final market continues to be the most expensive form of transportation in the Pacific Northwest. Northern Washington and Southern Idaho were the only regions in which rail was more costly than truck.

Shipping rates for truck and rail increased slightly in the Pacific Northwest during the lock outage four percent and two percent, respectively. Truck-barge rates were not included since only one firm in Eastern Oregon was able to use barge transportation during the extended lock outage.

Additional costs, such as investment in storage expansion and shipping from alternative sources, were incurred by several firms in varying amounts. Railcars were considered unreliable for some elevators during the lock outage, leading to unforeseen costs, delays and potentially lost business.

Due to the fact that barge transportation, for the most part, was halted for the four months of the extended lock outage, most barge companies temporarily laid off a significant number (from 35 percent to 67 percent) of their employees, including boat crews, in order to reduce costs. Some barge companies offered job sharing and reduced employees' work hours rather than lay off their entire staff. Some barge employees chose to be laid off during the winter months to pursue schooling and/or extended vacations that would not normally have been possible. This allowed employees at certain firms who desired to stay on staff during the outage to do so. All of the barge lines were able to continue benefit packages for employees during the extended lock outage. None of the barge lines located on the Columbia-Snake River lost any employees to the outage by either discouragement or lack of funds.

Although the bulk of the Columbia-Snake River was closed to barge traffic from December 2010 to March 2011, Bonneville Lock and Dam remained open during a large portion of the outage. This allowed a few barge lines to continue service to areas below The Dalles Lock and Dam and within pools. Commodities shipped by barge during the extended lock outage included select sources of wheat, forest products, paper and rock products (see Section 2.2).

In contrast to barge companies, which lost business for the majority of the lock outage, rail lines experienced an increase in cargo loads during the lock outage. Rail lines in the Pacific Northwest dealt with greater than normal volumes, additional products that would have moved by barge, increased crew numbers, additional days of operation and several extra trains per week. Part of this experience included rail lines reaching out to industries that needed transportation during the outage and partnering with local ports to aid in the movement of products that would normally travel by barge.

Petroleum companies have been reserved about their procedures during the extended lock outage. When a petroleum representative was asked about specific impacts and volumes shipped from December 2010 to March 2011, he gave this statement: "Regrettably, much of the information you have requested is company propriety information and we will not release it." However, according to the Oregon Department of Energy, petroleum companies shipped more than half of their product by tanker truck during the lock outage. In addition, six petroleum barges were stored at Pasco during the beginning of the lock outage to supply Eastern Washington and Oregon with enough fuel for about three weeks, which gave fuel companies time to arrange rail and truck transportation for the remaining lock outage.

Paper companies in the Pacific Northwest moved 58,000 tons of forest products from December 2010 to March 2011 by truck. One paper firm stated that woodchip shipments were being brought in by five trucks per day over the 15 week period. However, not all forest products were transported from the typical origin of Lewiston, Idaho and Boardman, Oregon. One paper company trucked local logs and woodchips, from a firm that is not normally utilized, to their facility in order to mitigate transit time and costs. Additional costs were incurred during the extended lock outage including an increase in inventory costs, storage costs and transportation costs.

Introduction

Waterborne movements are one of the more economical and cost-efficient methods of transport among all modes of transportation, comprising a key component of the Pacific Northwest multimodal transportation system. More than 35 commodities travel up and down the Columbia-Snake River daily. These commodity shipments move through eight separate locks and dams, including the Snake River dams: Lower Granite, Little Goose, Lower Monumental and Ice Harbor; followed downriver by the Columbia River dams: McNary, John Day, The Dalles and Bonneville. Commodity shipments moving through this river system were recently halted for 15 weeks during the winter of 2010-2011 for an unprecedented extended lock outage.

This report's main objective is to capture the effects on, and decisions made by, shippers, river carriers, government entities, ports and communities during the extended lock outage. The report's secondary objective is to describe the general characteristics of transportation movements by rail and truck during the 15 week period between December 10, 2010 and March 24, 2011.

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3.1 Wheat Industry Structure and Operations

1 One bushel of wheat is equal to 60 pounds and 2,000 pounds is equal to one U.S. ton, so one bushel is equal to 0.03 U.S. tons.

Of the survey respondents, Northern Washington elevators shipped about 20.3 million bushels1 during the extended lock outage, the largest volume from any of the regions in the Pacific Northwest during that time period. This region moved 57 percent of the 37.5 million bushels shipped from the tri-state area during the winter months (Table 3.1). Eastern Oregon elevators shipped the second highest volume during the lock outage, 9.7 million bushels or 27 percent of all Pacific Northwest wheat shipments. Northern Idaho firms shipped 2.4 million bushels or seven percent of all wheat movements, Southern Idaho elevators shipped 1.6 million bushels or five percent of all wheat shipments and Southern Washington firms shipped 1.4 million bushels or four percent of all wheat movements during the extended lock outage (Table 3.1).

All regions experienced a dramatic decline in tonnage shipped during the extended lock outage. For Southern Washington elevators, who normally ship the majority of the wheat from the Pacific Northwest, barge transportation halted for 15 weeks during the extended lock outage. This mode of transportation combined with another, usually truck, is normally used to ship 97.5 percent of wheat coming from Southern Washington throughout the year (Interim Report #2). Due to the lock outage and the isolated nature of Southern Washington, elevators in this area Table 3.1 Wheat Tonnage Shipped by Survey Respondents, Dec 2010 - Mar 2011 only moved 1.4 million bushels of all Northwest wheat transported during the extended lock outage either by rail or truck. That is a 95% decrease in wheat shipments during the extended lock outage period, reflecting prepositioning of some grains and a great dependence on barge transportation in typical years.

Eastern Oregon firms, which usually ship over 12 million bushels from December to March, shipped only 9.7 million bushels, a 20 percent decrease in tonnage shipped during the extended lock outage; this drop in shipments was the smallest in the Pacific Northwest from December to March 2011 (Figure 3.1). The small decrease in shipments from Eastern Oregon was due to a major elevator's location near The Dalles Lock and Dam; this river elevator had barge access for 11 weeks of the 15 week outage as it is located west of The Dalles. Therefore barges only needed to travel through Bonneville Lock and Dam during the lock outage.

Northern Idaho elevators experienced an 86 percent decrease in wheat tonnage shipped out of the region from December 2010 to March 2011. Normally, 17 million tons is shipped from this area. This large decrease is due to the fact that four of the five firms surveyed in Northern Idaho are located in or near Lewiston, Idaho; elevators in Lewiston almost solely rely on barge transportation. During a typical time period, 79 percent of wheat shipments originating from Lewiston elevators travel by barge (Interim Report #2). Southern Idaho firms saw a decline in shipments of 32 percent, or about 755,000 bushels; these firms did not experience a large decline in shipments as they typically use rail (45 percent of all shipments) or truck (33.3 percent of all shipments) to transport wheat. Finally, Northern Washington firms' shipments dropped by 40 percent or decreased by 13.6 million bushels (Figure 3.1). During the lock outage, Northern Washington elevators relied heavily on rail due to conveniently located rail loading facilities in the region; these facilities allowed firms in Northern Washington to continue shipments, although decreased, during the lock outage.

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