Bloomberg News

Drought-Parched Mississippi River Is Halting Barges

November 27, 2012

Drought-Shrunk Mississippi Halting Barges as ADM Seeks Options

A barge powers its way up the Mississippi River on Nov. 16, 2012, in St. Louis. A top Corps of Engineers official has ordered the release of water from an upper Mississippi River reservoir in an effort to avoid closure of the river at St. Louis to barge traffic due to low water levels caused by drought. Photographer: Jeff Roberson/AP Photo

Mississippi River barge traffic is slowing as the worst drought in five decades combines with a seasonal dry period to push water levels to a near-record low, prompting shippers to seek alternatives.

River vessels are cutting loads on the nation’s busiest waterway while railroads sign up new business and the U.S. Army Corps of Engineers draws criticism from lawmakers over its management of the river, which could be shut to cargo from companies including Archer-Daniels-Midland Co. (ADM:US) next month.

“Our shippers are looking at alternate modes of transportation,” said Marty Hettel, senior manager of bulk sales for AEP River Operations, the barge unit of American Electric Power Co. (AEP:US), a utility owner based in Columbus, Ohio. “If you’re shipping raw materials to a steel mill in Chicago, you’re trying to figure out if you can go to Cincinnati or Louisville, Kentucky, unload it out of the barge and rail it up to the steel mill.”

The worst U.S. drought since 1956, which dried farmland from Ohio to Nebraska, will last at least through February in most areas, according to the U.S. Climate Prediction Center in College Park, Maryland. Barges on the Mississippi handle about 60 percent of the nation’s grain exports entering the Gulf of Mexico through New Orleans, as well as 22 percent of its petroleum and 20 percent of its coal.

‘Economic Catastrophe’’

Barge, shipping and business organizations including the National Association of Manufacturers, the U.S. Chamber of Commerce and the American Petroleum Institute in a letter today urged President Barack Obama to declare an emergency in the region, calling for “immediate assistance in averting an economic catastrophe in the heartland” of the U.S.

Jay Carney, the White House spokesman, said the administration has sought drought relief for farmers, and today referred questions about the request to the Corps of Engineers

Senator Tom Harkin, an Iowa Democrat, also said Obama must act. “We need action to increase water flow from the Missouri River into the Mississippi,” Harkin said in an e-mail. “We also need to take immediate steps to enable the destruction of rock formations under the Mississippi River, which will allow navigation with less water.”

Mississippi water levels may drop to an historic low next month. The waterway is falling in part because of the U.S. Army Corps of Engineers, which last week started reducing outflows from the Missouri River as part of an annual operating plan to ensure regions further north have adequate water.

Shallow Water

That may help make the Mississippi too shallow to navigate by Dec. 10 from St. Louis south about 180 miles (290 kilometers) to Cairo, Illinois, where the Mississippi meets the Ohio River, according to the American Waterways Operators and Waterways Council Inc., a trade group based in Arlington, Virginia. About $7 billion worth of commodities usually travel on the Mississippi in December and January, according to the organization.

“It is imperative that the Corps review their actions to ensure they address this problem so it doesn’t impact waterborne commerce,” said Angela Graves, a spokeswoman for Marathon Petroleum Corp. (MPC:US), which operates a fleet of 180 barges and 15 tugboats to ship crude oil, transportation fuels and petroleum products on waterways, in a telephone interview.

December and January are historically the lowest times of year for the rivers because the fall season is usually dry and tributaries freeze, said Steve Buan, service coordination hydrologist at the U.S. North Central River Forecast Center in Chanhassen, Minnesota.

‘Ice Bite’

“That’s called the ice bite, the water gets made into ice and it can’t flow downstream,” Buan said.

The record low in St. Louis was minus-6.1 feet in January 1940, according to the National Weather Service. The river was at minus-1.49 feet at 1:30 p.m. on Nov. 26, and may drop to minus-5 or even minus-6 feet as measured by the river gauge in about two weeks if the weather doesn’t change and the Army Corps of Engineers drawdown of the Missouri River takes place as planned, Buan said.

About 8 million tons of grain, coal, steel, petroleum and other goods travel each month between St. Louis and Cairo, said Hettel, with AEP River Operations.

Shutting the river will increase transportation costs for shippers, he said. They’ll continue to pay full price for barges lightened to meet narrower depth restrictions. Only a few tugs are capable of operating with depth restrictions expected in December, he said.

Transport Options

Decatur, Illinois-based ADM, the largest U.S. grain processor, is “monitoring the situation closely and making arrangements for alternative transportation methods, in case they’re necessary,” said spokeswoman Jackie Anderson in an e- mail.

Enterprise Products Partners (EPD:US) LP is running Mississippi barges partly empty to cope with shallow water, spokesman Rick Rainey of the Houston-based pipeline company said yesterday in a telephone interview. Of its 200-vessel fleet, two barges that when fully loaded carry about 60,000 barrels, are operating on the Mississippi, Rainey said.

Rail shipments to export terminals in the week ending Nov. 14 were up 16 percent from the same period in 2011, according to the U.S. Department of Agriculture. Meanwhile, Mississippi River barge traffic south was down 29 percent and northbound shipping declined 8.9 percent from a year ago in the week that ended Nov. 17, according to the Army Corps of Engineers.

Trains Gain

Low water on the Mississippi means that Canadian National Railway Co., (CNR) based in Montreal, is “currently handling more business as a result of the situation while remaining focused on protecting its existing rail traffic base,” said company spokesman Mark Hallman.

Kansas City Southern (KSU:US) is “working with our customers to ensure that we are in a position to meet any increase in rail demand due to the reduction in river capacity,” said Bill Galligan, vice president for investor relations of the Kansas City, Missouri-based company, in an email.

“It will definitely be a positive for the rails,” said Lee Klaskow, a Skillman, New Jersey-based analyst for Bloomberg Industries research. Still, the changes in shipping costs may cause delays, he said. “It gets to the question, ‘Is the freight competitive with railroad?’” he said. “If it’s too expensive to ship, sometimes it makes sense for whoever’s shipping to wait it out.”

Disaster Request

Fifteen U.S. senators, 62 members of the House and the governors Illinois, Iowa and Missouri wrote the Corps asking it to delay water-reducing actions and and remove rocks that impede traffic. The Mississippi “is vital to commerce for agriculture and many other goods,” the lawmakers, including Senator Dick Durbin of Illinois, that chamber’s second-ranking Democrat, wrote.

The Army Corps is following the instructions of Congress that directed management of the Missouri River, which flows into the Mississippi at St. Louis, said Bob Anderson, a spokesman for the Army Corps in Vicksburg, Mississippi.

The federal Missouri River water-management plan can worsen the Mississippi’s situation as a result, Anderson said. The organization is “following the manual,” he said. The letter- writing lawmakers argue against that, saying their reading of law provides for more flexibility.

To mitigate its reduction of Missouri River flow, which started Nov. 23, the Corps started releasing water from Minnesota and Iowa on the upper Mississippi on Nov. 20. Still, the Mississippi may reach record lows, a disruption of traffic that may be unavoidable, he said.

“It’s not so much river management now as it is the extended drought,” he said. “We have nothing to work with. It’s gotten to the point where it’s going to become a problem with navigation.”

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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Companies Mentioned

  • ADM
    (Archer-Daniels-Midland Co)
    • $44.73 USD
    • 0.12
    • 0.27%
  • AEP
    (American Electric Power Co Inc)
    • $51.9 USD
    • 0.23
    • 0.44%
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