Summary

The U.S. Army Corps of Engineers (Corps) has major federal responsibilities for supporting flood risk management activities in communities across the nation, ensuring navigable channels on the nation’s waterways, and restoring aquatic ecosystems. The Corps also has authorities to provide water supply, protect and maintain beaches, generate hydroelectric power, support water-based recreation, and ensure design depths in the nation’s ports, harbors, and associated channels. The Corps is the federal government’s largest producer of hydropower and a leading provider of outdoor recreation areas and facilities. The Corps of Engineers also regulates alteration of wetlands.

To meet its responsibilities in these various sectors, the Corps of Engineers has built incrementally what now comprises an extensive water resources management infrastructure that includes approximately 700 dams, 14,000 miles of levees in the federal levee system, and 12,000 miles of river navigation channel and control structures. This infrastructure has been developed over the course of more than a century, most of it on an individual project basis, within varying contexts of system planning. From a macro-scale perspective, the water resources infrastructure of the nation is largely “built out.” New water projects of course will be constructed in the future, but given that most of the nation’s major river and coastal systems have been developed, there are reduced opportunities for new water resources infrastructure construction. Ecosystem restoration was added as a primary mis-



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Summary The U.S. Army Corps of Engineers (Corps) has major federal responsi- bilities for supporting flood risk management activities in communities across the nation, ensuring navigable channels on the nation’s waterways, and restoring aquatic ecosystems. The Corps also has authorities to provide water supply, protect and maintain beaches, generate hydroelectric power, support water-based recreation, and ensure design depths in the nation’s ports, harbors, and associated channels. The Corps is the federal govern- ment’s largest producer of hydropower and a leading provider of outdoor recreation areas and facilities. The Corps of Engineers also regulates altera- tion of wetlands. To meet its responsibilities in these various sectors, the Corps of Engi- neers has built incrementally what now comprises an extensive water re- sources management infrastructure that includes approximately 700 dams, 14,000 miles of levees in the federal levee system, and 12,000 miles of river navigation channel and control structures. This infrastructure has been de- veloped over the course of more than a century, most of it on an individual project basis, within varying contexts of system planning. From a macro- scale perspective, the water resources infrastructure of the nation is largely “built out.” New water projects of course will be constructed in the future, but given that most of the nation’s major river and coastal systems have been developed, there are reduced opportunities for new water resources infra- structure construction. Ecosystem restoration was added as a primary mis- 1

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2 Corps of Engineers Water Resources Infrastructure sions area for the Corps in 1996 and has been the main focus of new con- struction. Large portions of the Corps’ water resources infrastructure were built in the first half of the twentieth century and are experiencing various stages of decay and disrepair. Project maintenance and rehabilitation are thus high priority needs for Corps water infrastructure. Funding streams in the U.S. federal budget over the past 20 years consistently have been inadequate to maintain all of this infrastructure at acceptable levels of performance and ef- ficiency. In instances where the Corps shares maintenance responsibilities with a nonfederal partner (e.g., many of the flood risk management projects built by the Corps), local or state funds are less available than in recent past years. The water resources infrastructure of the Corps of Engineers thus is wearing out faster than it is being replaced or rehabilitated. Estimated to have a value of $237 billion in the 1980s, the estimated value of that infra- structure today is approximately $164 billion (Calvert, 2012). These systemic modern challenges regarding the funding and mainte- nance of the Corps water infrastructure led the agency to request advice from the National Research Council (NRC) and its Water Science and Tech- nology Board (WSTB). This report is from the NRC Committee on U.S. Army Corps of Engineers Water Resources Science, Engineering, and Planning. It is the second in a series of five reports from this committee. The committee issued its first report in 2011, providing an overview of the scope of the national water resources challenges facing the Corps, and it will issue three future reports on topics to be determined by the Corps and the NRC (NRC, 2011). This report provides observations and advice in three broad areas relat- ed to Corps water resources infrastructure: (1) the federal Water Resources Development Act (WRDA) process, (2) determining priorities for operation, maintenance, and rehabilitation (OMR), and (3) options for improving OMR. Current approaches for budgeting and prioritizing OMR projects are presented and discussed, and the report examines the capacity of the annual budget processes of the WRDA and the Corps to address water resources in- frastructure challenges. In considering future priorities and directions for the Corps of Engi- neers, it is important to note that the Corps operates at the behest of the U.S. Congress and the executive branch. Many of this report’s findings and

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Summary 3 recommendations therefore are directed to the U.S. Congress and executive branch, as well as to the Corps of Engineers. STATUS OF CORPS OF ENGINEERS WATER RESOURCES INFRASTRUCTURE The national water infrastructure is largely “built out.” Compared to an earlier era, there are fewer opportunities and only a limited number of un- developed or appropriate sites for new water resources infrastructure. New water projects will be constructed in the future, but the nation’s water re- sources infrastructure needs increasingly are in the areas of existing project OMR. In some instances, full project replacement may be needed. As new construction has declined since 1980, so too has the Corps civil works budg- et and hence funds available for OMR. Trends in funding for the Corps over the past three decades make clear this reality. THE FEDERAL WATER RESOURCES DEVELOPMENT ACT PROCESS Efficient investment in Corps water infrastructure OMR requires setting of priorities, but existing legislative processes for Corps funding and author- izations do not generally provide such guidance. The Congress and the Of- fice of Management and Budget (OMB) of the executive branch undertake many water resources planning responsibilities for new projects, but there exists no systematic process or guidelines for setting OMR priorities exist. The U.S. Congress and the executive branch Office of Management and Budget are the de facto national water resources planners. There is no defined distribution of responsibility between Congress and the execu- tive branch, including the Corps and OMB, for national-level prioritiza- tion of OMR needs for existing water infrastructure. Further, neither Congress nor the administration provides clear guiding principles and concepts that the Corps might use in prioritizing OMR needs and invest- ments.

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4 Corps of Engineers Water Resources Infrastructure Federal water resources projects are authorized through federal Water Resources Development Act (WRDA) legislation. The WRDA and its pro- cesses were established by Congress in the 1970s and served to replace pro- cesses established under the Flood Control Act and Rivers and Harbors Acts. WRDA serves as a vehicle to authorize a collection of new water re- sources projects. The process for identifying, authorizing, funding, and im- plementing water resources projects embodied in WRDA is rooted in an era when the nation was expanding into undeveloped areas and building new water resources infrastructure. Corps civil works activities and needs today are less focused on new project construction and more focused on OMR of existing infrastructure. The federal WRDA process was developed in a previous era of water management during which new water project construction was of high priority. The WRDA is a familiar process to Congress and will continue to be used as a means for authorizing new federal water projects. WRDA was not designed to identify and establish OMR priority actions and in- vestments for existing Corps of Engineers water infrastructure. The pro- cess of individual project appropriations thus represents a de facto pro- cess for national water project prioritization. Higher congressional and administration priority on OMR issues for Corps infrastructure will entail some reorientation away from the present strong focus on WRDA. CORPS MISSION AREAS AND INFRASTRUCTURE ASSETS The Corps’ primary civil works mission areas are navigation, flood risk management, and ecosystem restoration. The Corps also has authorities, re- sponsibilities, and programs for hydropower generation, harbors and ports, recreation, and coastal and beach protection. For each mission area, there are generally separate annual budgets for operation and maintenance (O&M), and for construction. Most minor and routine rehabilitation is funded through O&M budgets, whereas major rehabilitation and replace- ment generally are funded through annual construction budgets. The pro- cess of prioritization for the annual O&M budget takes place generally at the division and district level and follows general guidelines, but it has many variations, depending on local needs.

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Summary 5 The Corps’ original involvement in national water resources planning dates back to the nineteenth century and its work in ensuring navigable riv- ers. In the twentieth century, and after 1927 Mississippi River flooding and resulting damages, the Corps became involved in flood damage reduction (this report, like the Corps of Engineers, uses the term “flood risk manage- ment”). The Corps’s third primary mission area is ecosystem restoration, which was formally established in 1996. In an earlier era, it was easier to in- tegrate a smaller number of missions and to share expertise and experience among them. Today, however, the larger number of responsibilities makes agency-wide integration more difficult. In carrying out its duties in these areas, the Corps is guided by numer- ous federal laws and authorizations, a wide mix of clients with different goals, and different modes of taxation and sources of revenue. Its distinctive and diverse water infrastructure, its specific roles in the national economy, and its clientele and history make the Corps a unique organization. This makes many of the potential approaches and solutions to Corps OMR chal- lenges specific to the Corps. Corps of Engineers water resources infrastructure responsibilities, in- cluding navigation, flood risk management, and hydropower generation, differ significantly in terms of enabling legislation, taxation and revenue sources, clients, and relations with the private sector. The Corps faces challenges in its OMR duties given that its roles, partnerships, and suc- cesses in addressing OMR in one mission area often are not transferred easily to other areas or activities. Greater private sector involvement is often raised as one option for in- creasing revenues for public agencies or works, and this report identifies some ways in which private-sector participation in Corps OMR activities might be enhanced. Opportunities for greater private-sector involvement in Corps infra- structure operations and maintenance activities will vary by Corps mis- sion area, and by economic sector. In general, these opportunities are greater in the areas of flood risk management, port and harbor mainte- nance, and hydropower generation, and less for inland navigation.

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6 Corps of Engineers Water Resources Infrastructure Inland Navigation The inland navigation system presents an especially formidable chal- lenge and a set of difficult choices. There are limited options and stark reali- ties, including: x Funding from Congress for project construction and rehabilitation has been declining steadily. x Lockage fees on users/direct beneficiaries could be implemented. These are resisted by users and others. x Parts of the system could be decommissioned or divested and the extent of the system decreased. x The status quo is a likely future path, but it will entail continued de- terioration of the system and eventual, significant disruptions in service. It also implies that the system will be modified by deterioration, rather than by plan. Flood Risk Management Reductions in resources available for construction of federal flood con- trol works present opportunities for expanded implementation of nonstruc- tural flood risk management options that are more efficient, less costly, and provide greater environmental benefits. Many of these strategies have been used successfully for years, in many parts of the country. They have not al- ways received full consideration, however, because of a historical emphasis on large engineered civil works for flood protection. Today’s fiscal realities present the Corps of Engineers opportunities to collaborate more closely with local communities in providing technical information and other types of support. Hydropower Generation Hydropower revenues could be increased by improving the efficiency of the turbine systems used in Corps hydropower projects, as has been

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Summary 7 demonstrated by the Tennessee Valley Authority. Total generation from Corps hydropower projects decreased by 16 percent from 2000 to 2008. By contrast, the TVA increased hydropower generation 34 percent with the same water availability through efficiency improvements in the 1980s and early 1990s (Sale, 2010). This suggests that at least a 20 percent improvement with current water flows is achievable and would provide significant new revenues. Because of its revenue-generating potential, hydropower is in an especially good position to accommodate public-private investments re- quired to increase capacity and reliability. Some modification of operating regulations by the U.S. Congress will be needed to realize this potential. Systematic Asset Management An up-to-date, accessible water resources infrastructure inventory, in- cluding infrastructure conditions, benefits, and risks, would be useful in helping set priorities among competing Corps water infrastructure OMR needs. The Corps has made progress on implementing a more systematic approach to infrastructure asset management over the past decade, but pro- gress has been slow. There are various asset inventories at the district and division level, and some at the national level, but they are not well coordi- nated within each mission area. Increasing strains placed on the Corps today by decaying infrastruc- ture and associated fiscal challenges demand a systematic approach to as- set management. To its credit, the Corps has begun an asset management initiative. To further promote these efforts, the Corps should continue to develop more comprehensive, and publicly accessible, inventories of in- frastructure assets for each of its core mission areas. ECONOMIC PRINCIPLES AND FUTURE INVESTMENTS Future OMR investments should be guided by a more coherent set of principles that include strong reliance on economics of infrastructure in- vestment. A 2003 NRC committee that studied national freight transport

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8 Corps of Engineers Water Resources Infrastructure offered the following set of investment and economic principles that mer- it careful consideration. Those principles can be summarized as: x Promote economic efficiency, with investments directed to im- provements that yield greatest economic benefits. x Limit government involvement to circumstances in which mar- ket-based outcomes clearly would be highly inefficient. Government also is responsible for managing facilities where it has important historical re- sponsibilities that would not be easily altered, and where institutional complexity necessitates government leadership. x Limit government subsidies and ensure that facility beneficiaries pay the costs. x Rely more on user revenues, and the ‘user pays’ principle, along with matching funds and stronger public-private relationships. Along with economic development principles, broader social and environ- mental goals for Corps projects, including public safety purposes, of course need to be considered when prioritizing OMR investments for Corps pro- jects (the complete listing of these principles is on pages 54 and 55.) OPTIONS FOR CORPS WATER RESOURCES INFRASTRUCTURE In order to identify viable paths for sustainable management of Corps of Engineers water infrastructure, it is useful to consider the range of options available to the Corps, the U.S. Congress, and Corps project beneficiaries. Possible future paths that might be taken with regard to Corps of Engineers infrastructure are as follows: 1. Business as usual. Accept degraded performance, and the conse- quences of gradual or sudden failure of infrastructure components. 2. Increase federal funding for operations, maintenance, and rehabili- tation. 3. Divest or decommission parts of Corps infrastructure to reduce OMR obligations. 4. Increase revenue from Corps project beneficiaries.

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Summary 9 5. Expand opportunities for partnerships in operating and maintain- ing portions of existing infrastructure. 6. Adopt some combination of these options. Option 1: Business as Usual Resources from the Corps annual budget (i.e., the general fund of the U.S. Treasury) for new construction and rehabilitation of existing water in- frastructure have been declining steadily and are inadequate to cover all OMR needs. Other possible sources of funding have been inadequate to cover all costs, leading to an unsustainable situation for maintenance of ex- isting infrastructure. This scenario entails increased frequency of infrastruc- ture failure and negative social, economic, and public safety consequences. The potential extent of these negative consequences is not well understood. Option 2: Increase Federal Funding for Operations, Maintenance, and Rehabilitation There has been a long-term declining trend in funding for Corps water resources infrastructure construction and rehabilitation across numerous federal budgets. The future viability of this option is unclear. Option 3: Divest or Decommission Parts of the Corps Infrastructure The inability of the Corps to divest and decommission infrastructure is an obstacle to focusing available funding on highest-priority OMR needs. Financial stresses placed on the Corps to provide safe and efficient operation of all infrastructure leads to partial investments across many facilities, rather than larger investments in more critical facilities. Decommissioning and di- vestment of some components of the Corps water infrastructure would re- duce OMR obligations, but such decisions are matters of public policy and would require action by Congress or the administration.

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10 Corps of Engineers Water Resources Infrastructure Option 4: Increase Revenues from Corps Project Beneficiaries Opportunities exist for expansion of revenue capture from water re- sources infrastructure, especially for inland navigation and hydropower projects. However, legal and other barriers will necessitate congressional ac- tion to expand such revenue streams. Option 5: Expand Partnerships Although some components of the Corps water infrastructure entail shared responsibilities and activities with private entities, public-private partnerships are utilized only in a limited manner to support operations for much of Corps water resources infrastructure. Greater private- sector partic- ipation in Corps water infrastructure OMR will not be merited or desirable in all circumstances. Nevertheless, public-private partnerships offer a range of possibilities for bringing new resources and potentially more efficient methods to OMR of Corps water resources infrastructure. Given the many complexities and uncertainties surrounding partnership prospects, with pri- vate sector entities as well as state and local governments, a credible evalua- tion of promising opportunities would be useful for identifying the most immediate, promising prospects. This evaluation ideally would be conducted by an independent and credible organization with good knowledge of Corps of Engineers functions, policies, and activities. The U.S. Congress and/or the administration should commission an investigation of opportunities for additional and different kinds of part- nerships for operation and maintenance of Corps water resources infra- structure. Partnerships investigated should include both those with pri- vate entities, and partnerships with state and local governments. The in- vestigation should be conducted by an entity independent of the Corps of Engineers. Option 6: Some Combination of Options 2-5

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Summary 11 THE NEED FOR FEDERAL LEADERSHIP AND ACTION The Corps of Engineers clearly faces many challenges in setting OMR priorities and in procuring resources for OMR needs. Many of these chal- lenges are rooted in political issues and decisions, and may require changes in federal legislation. Their successful resolution therefore will require stronger leadership from the U.S Congress and executive branch. In some instances, a willingness to make a break with past traditions and practices will be needed. The process of federal water resources planning by the U.S. Congress and administration is reflected in new project authorizations through WRDAs and appropriations for new and ongoing projects. These familiar processes focus far more on new water project construction than on OMR of existing infrastructure. Neither the U.S. Congress nor the administration has established a process or program for setting OMR priorities for existing Corps water projects. During an earlier era of expansion of national water infrastructure, there was little need for such a process. Today, in a setting of deteriorating Corps water infrastructure and increasing importance of OMR, this type of process increasingly is necessary to identify high-priority in- vestments. The lack of a process for high-level OMR prioritization repre- sents an impediment to more efficient investments in critical Corps infra- structure, and it inhibits the ability to divest or decommission water re- sources infrastructure projects. The Corps effectively makes decisions about priorities within its allotted annual budgets. The agency, however, lacks broader authority for higher level, policy-based prioritizations, such as those that would lead to infrastructure divestiture or decommissioning. More specific direction from the U.S. Congress regarding priority OMR investments for Corps water infrastructure will be crucial to sus- taining the agency’s high priority and most valuable infrastructure. The executive branch also could play a more aggressive role in promoting dia- logue between the Corps and the Congress on existing infrastructure in- vestment needs and priorities.