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Article Excerpt
The Great Lakes St. Lawrence Seaway System has historically been important to the development of the North American mid-continent. The system allows ocean vessels to carry freight between the Lakes region and overseas points, and allows for movement of goods on laker vessels (lakers) both wholly within the Lakes and between the Lakes and eastern ports such as Montreal and Quebec City. However, the system's overall importance to the region's economy has been reduced as traffic levels have fallen, and the nature of the contribution has moved towards intra-lake commerce and away from Seaway ocean commerce. At the same time, the Great Lakes' position as the world's largest freshwater body and its role in tourism and the overall quality of life has become more recognized since the modern Seaway opened in the 1950s. Because of the Lakes' position as the world's largest freshwater body, the Seaway's role in opening the Lakes to ocean vessels, and the number of environmental issues in the Lakes, our research focuses on ocean vessels moving in and out of the Lakes.
Changes in the system's role in the region suggest the need for a reassessment of the macroeconomic costs and benefits of the Seaway. This transportation value reassessment has become more important given the time since the last comprehensive reports on the system's benefits, as the need for new investments in the system develops, as new information becomes available about the risks related to ocean-vessel-borne invasive aquatic species (Holeck 2004), and as some courts and legislators have called for a moratorium and/or ballast water treatment rules on ocean shipping into the Lakes (McDiarmid-2004, Alexander 2004, Egan 2007). It is especially important to assess the costs and benefits of continued use of the Seaway System for ocean vessel traffic given scientific reports on damage to the Lakes economy from invasive species, and the environmental calls for moratoriums on ocean shipping.
In this article we report on the results of two detailed studies conducted on the transportation benefits to Canada and the U.S. from ocean vessel moves into and out of the Lakes. (1) Transportation benefits are based on an analysis of what industry would have to pay if ocean vessels did not enter the Lakes and goods had to be transported to and from the coasts on alternative modes such as rail, laker, barge, and truck. Our analysis, in effect, examines the productivity benefit provided by direct ocean shipping into the Lakes. The analysis considers the overall transportation benefits to industry, and provides a benefits value that can be used in future cost-benefit analyses.
SYSTEM OVERVIEW
The Great Lakes St. Lawrence Seaway extends 1,300 miles from Montreal to Duluth (SLSMC/SLSDC Web pages 2007; U.S. Army 2002a; Higginson and Dumitrascu 2007). (2) Figure 1 depicts the two key parts of the system: (1) the Great Lakes and (2) the Seaway itself above Montreal. The Great Lakes contain some 5,439 cubic miles of fresh water, making them the largest freshwater body in the world, and they represent some 95 percent of fresh water in the U.S. The St. Lawrence River connects the Lakes to tidewater. The upper St. Lawrence, above Montreal, is known as the Montreal-Lake Ontario (MLO) Section and is the data reporting point for traffic levels used in this study.
[FIGURE 1 OMITTED]
The Seaway itself begins at Montreal, some 1,000 miles from the open Atlantic. At Montreal the river is twenty feet above sea level, rising gradually from the Atlantic Ocean. Ships travel upriver from Montreal to reach Lake Ontario, rising more than 225 feet through a series of locks, as shown in Figure 1. Ships pass through the U.S.-operated Eisenhower and Snell locks near Massena, and five Canadian-operated locks as they pass through the Thousand Islands area and on into Lake Ontario. The Lakes portion of the system begins at Lake Ontario. The Canadian Welland Canal allows ships to bypass Niagara Falls en route to Lake Erie. After traversing Lake Erie, ships pass through the Detroit and St. Clair Rivers en route to Lake Huron and Lake Michigan. Finally, ships passing into Lake Superior must traverse the St. Marys River rapids via the Soo Locks. The system limits ships to Coast Guard Category VII with a maximum length of 740 feet, a beam of 78 feet, and a draft of 26.5 feet.
The Seaway is open approximately nine months per year, typically opening in late March and closing in late December. During the three or so months the Seaway is closed, goods that normally move via the Seaway either do not move at all, or move by alternative modes. Funding for the Seaway' s general operation and maintenance is quite different in Canada and the U.S. In Canada, the Seaway is primarily supported with tolls that cover the bulk of annual costs. In the U.S. there are no tolls on the Seaway and costs are paid for out of the Harbor Maintenance Trust Fund.
RESEARCH APPROACH AND ASSUMPTIONS
The methodology first involved an overall literature review and examination of several prior studies on Seaway benefits. Some ninety-five research reports and academic articles, and hundreds of trade articles, were reviewed. Following the literature review, information on traffic volumes in various sections of the Seaway was summarized. Subsequently, fifty-eight interviews were conducted with various organizations including carriers, stevedores, ports, ocean brokers, ocean rate services, grain and steel shipper/receivers, and related government organizations. These interviews were designed to gather background information, transportation and handling pricing information, and other data related to shipping.
The overall research approach was to estimate the transportation productivity benefits of ocean vessel shipping as compared to moving the same cargoes to and from the coasts by other modes. This "comparative shipper cost" methodology resulted in an estimation of the door-to-door costs to industry of moving current Great Lakes ocean-borne cargoes directly into and out of the Lakes region, as compared to the door-to-door costs of moving the same goods to and from the coasts by ocean vessel with the alternative modes. The difference in these two costs to shippers is in effect the transportation savings, or "productivity benefit" provided by the Seaway ocean direct mode/routing. This research design is similar to the approach used in 1985 Seaway studies by Booz, Allen (1985); and in the Saint-Laurent Project study on the Saint Lawrence (Saint-Laurent 1985).
To estimate the transportation savings to shipper/receivers from ocean shipping in the Lakes, it was first necessary to estimate door-to-door costs for the goods moving by ocean vessel, including the costs related to inland shipping to and from Great Lakes ports, handling, and ocean rates. The next step was to evaluate each of the alternative modal options for shipping the goods to and from the coasts. The door-to-door cost to shippers per ton was then estimated for each option. The third step was to estimate the "most likely" mix of alternative means of shipping the goods. The "most likely" alternative was based on how the goods move during the three months of the year when the Seaway is closed, and on the estimated costs for each alternative route/mode. The costs to shippers for the "most likely" scenario could then be calculated and compared to the current ocean vessel costs.
Several assumptions were made for the study. First, given the freshwater Great Lakes and Seaway focus, a decision was made to use traffic data from the MLO section reporting point just above Montreal. Secondly, 2002 was selected as the study year for traffic levels because volumes that year were more representative of recent history. While 2002 traffic levels were used, it was decided to use mid-2004 transportation rates as they were more representative than unusually high 2002-2003 rates (Dry Baltic Index 2007). Unless otherwise noted, all tonnages have been converted to metric, and currency is in US$ at a conversion rate of C$1.00=US$.80.
TRAFFIC VOLUMES AND SIGNIFICANCE Table 1 summarizes Seaway MLO Section traffic and tonnage data since the opening of the modern Seaway. These data capture all volume moving in and out of the Seaway proper. The data indicate that Seaway MLO ocean shipping hit a peak in 1978 at 23.1 million metric tons (MMT) and has declined to 9.3 MMT in 2007, with some occasional "up" years in-between. Laker tonnage is also down since 1978. In terms of ocean vessel transits, in 2007, there were 459 inbound movements, followed by a return outbound trip, for 917 total trips. These transits average 1.60 inbound moves per day during the shipping season.
Given the traffic history, we believe the 2002 data offer a representative year for detailed analysis. While our analysis could have used...
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