Chapter 8 Water Carriers and pipelines

[Audio] Welcome to TL 882, today we will talk about water carriers and pipelines.

[Audio] Water carriers and pipelines are frequently overlooked by the general public. Most people are aware of trucks, planes and trains, but they have limited appreciation of the role and contribution of water and pipeline carriers to businesses and our economy. These two modes of transportation are a very important part of our transportation system and overall infrastructure, particularly for certain types of products..

Water Carriers.

[Audio] Naturally people flourish along water, and water way naturally become the first principle form of transportation, motive power such as wind can be provided by nature. Today, there are over 40,000 navigable kilometer of waterways in US. Basic raw materials ? Yes domestic water carriers compete with railroads for the movement of bulk commodities ( grain, coal, ores, and chemicals).

[Audio] Total freight increased 6.5%, water and pipeline took more market share than rail and truck..

[Audio] This table show you the trade within US water systems, and as one can see Mississippi River System carries the most freight among all 5 main water systems in US.

[Audio] Like motor carriers, the first major classification of the domestic water carrier industry is between for-hire and private carriers. A private carrier cannot be hired and only transports freight for the company that owns or leases the vessel. Private water carriers are permitted to transport, for a fee, exempt commodities; when they are hauling such exempt goods, they are technically exempt for-hire carriers. The for-hire water carriers consist of regulated and exempt carriers that charge a fee for their services because freight is classified as exempt and not exempt freight. Exempt freight includes commodities that are perishable, or things that haven't been processed, or timely materials. Exempt carriers, as indicated above, are excluded from the federal economic regulations administered by the Surface Transportation Board ( STB). Water carriers are exempt from economic regulation when transporting bulk commodities, both dry and liquid Regulated water carriers are classified as either common or contract carriers. Economic regulation, similar to that controlling motor carriers (e.g., operating certificates, rates, etc.), is administered by the STB. Internal Water Carriers Barges & towboats on principal U.S. rivers North- South traffic through central U.S. Great lakes Carriers Service between ports of five Great Lakes Access to Atlantic and Gulf ports through St. Lawrence Seaway Coastal Carriers Service between ports on Atlantic, or Pacific Oceans, or Gulf of Mexico Petroleum between Atlantic Coast and Gulf and between Pacific Coast and Alaska Intercoastal Carriers Service between ports on Atlantic and Pacific Oceans via Panama Canal.

[Audio] 1. Water carriers vigorously compete for traffic with other modes 2. to a limited degree compete with other water carriers (Because the number of carriers on a given waterway is limited, there is little incentive for the water carriers to compete with one another by lowering rates because they realize that the rate decrease will most likely be matched..

[Audio] This figure indicates the relative importance of the major commodities moved on the US waterway system in terms of their annual volume. Petroleum is the most important commodity for waterborne traffic. Crude materials were the second most important commodity with about 354.3 million short tons or 15% of the total followed by food and farm products. Crude materials: natural gas, metals, nonmetallic minerals like sand, gravel, and crude chemicals such as paints and solvents..

[Audio] Water carriers are considered to be medium-to-long-haul carriers. Their carrying capacity is relatively larges. Length of haul varies from 400 miles to over 1500 miles (coastal) and over 2000 miles (intercoastal). Their travel speeds is relatively slow (inland rivers 5.5- 9 mph).

[Audio] Because most domestic water carriers transport bulk materials, they use ships with very large hold openings to facilitate easy loading and unloading which allows a ship to carry more than one commodity at a time. The largest ship in the domestic water carriage industry is the tanker. A tanker can carry anywhere from 18,000 to 500,000 tons of liquid Another type of vessel is the barge, a powerless vessel towed by a tugboat. Barge is a flat-bottomed boat. Barges are most commonly used by internal waterway carriers. Additional barges can be added to a tow at very little additional cost. Dry cargo indicate solid and dry bulk cargo (most dominant), liquid cargo such as liquid chemical, fertilizers..

[Audio] Port terminals ar often provided by the public. It has been recognized for a long time that water transportation is a catalyst to economic activity in the community, and it is this belief that has spurred public investment in the operation of ports..

[Audio] The port facilitates ship loading and unloading, which means that the port must be equipped with cranes, forklifts, and other handling equipment. Terminals and ports are expensive Because barges and ships carry larger loads than rail or motor carrier vehicles, storage facilities are necessary at the port. With this information, one can guess the cost structure will be low fixed cost but high variable costs like motor carrier, airlines..

[Audio] Low fixed cost: water carriers do not provide their own highways (rights-of-way). The waterways are provided by nature (except canals) and are maintained, improved, and controlled by the government High variable cost: The carriers pay user charges— lock fees, dock fees, fuel taxes—for the use of government-provided facilities. These user charges are directly related to the volume of business, and therefore, are considered variable costs. Not labor intensive: Domestic water carriers usually do not require much labor at the terminal, because the carriers primarily transport bulk commodities that can be loaded and unloaded mechanically. Water transportation is not labor-intensive. In 2013, the MFP ( multifactor productivity labor cost/total cost) for domestic water transportation was 103.869. This compares to an MFP of 103.589 for rail, 104.929 for motor, and 108.486 for pipeline..

[Audio] The U.S. Coast Guard now tests American seamen for drug abuse before they are issued a seamen's license and before they can be employed. Seamen are also tested randomly during their employment. the public, which, rightly or wrongly, often view ports as a main source of air, water, and noise pollution Multicarrier alliances ( union or association for mutual benefit) Large ship means deeper they go. Many smaller ports will need to begin the dredging ( excavation of material from water at port) process to be compete. An increase from 6,000 20-foot equivalent units (TEU) to 10,000 TEU's has many ports worried for the future.

[Audio] Pipelines. Pipelines.

[Audio] Railroad imitated the development of pipelines in the oil fields then later sold to oil company which establishing the precedent of pipelines being owned by the oil company. After WWII, pipeline were orded to operate as common carriers..

[Audio] Today, more than 20% US freight ton-miles were moved by pipelines. 2/3 of the tom-miles transported by pipelines are oil and oil product and the other 1/3 is natural gas. Oil carrier vs natural gas carrier.

[Audio] 10% for-hire carriers are private and 90% are common carriers Oil companies hold the largest share of pipelines.

[Audio] 20 major integrated oil companies control about two-thirds of the crude oil pipeline mileage. Reasons for the limited number of pipeline companies: high startup cost,.

[Audio] Oil and oil product: majority freight. Length of haul is medium compare to other mode, crude oil movements average about 800 miles per shipment. Natural gas: second largest commodity Coal can be moved in pulverized form in water ( one-to-one ratio by weight), they are called slurry lines. The large slurry pipeline is between Arizona and Nevada covers 273 miles and moves 5 million tons per year. Chemicals: limited number of different types of chemicals are carried by pipelines. They are anhydrous ammonia ( NH3) ( fertilizer, liquified gas), propylene ( C3H6) ( fuel gas), and ethylene ( C2H4) (flammable gas)..

[Audio] low rates with average revenues are below one-half of a cent per ton-mile. a very good loss and damage record they can provide a warehousing function because their service is slow They are virtually unaffected by weather conditions, and they very rarely have mechanical failures..

[Audio] Intermodal competition in the pipeline industry is limited of the small number of companies, the economies of scale and high fixed costs preclude of facilities to a large extent. Intermodal Pipelines compete with railroads, water carriers, and motor carriers but the level of competition is limited. The most serious competition is water, or tanker operations, because their rates are competitive with pipelines. It is difficult for other modes to compete as costs are extremely low, dependability is quite high, and there is limited risk of damage to the product being transported..

[Audio] gathering lines are smaller in diameter, usually not exceeding 8 inches, whereas trunk lines are usually 30- 50 inches in diameter. Gathering lines are frequently laid on the surface while the trunk lines are laid underground..

[Audio] High proportion of fixed costs and low proportion of variable costs.

[Audio] The nature of operation ( one-way movement, limited geographic coverage of points, limited products, etc.) provides little opportunity to provide differential pricing practices. Pipelines quote rates on a per-barrel basis (one barrel equals 42 gallons). Pipeline rates are very low, which is reflected in the fact that they carry about 20 percent of the total intercity ton-miles and receive only about 4 percent of the total revenues. Quotes for rates are typically point-to-point or zone-to-zone. Also, minimum shipment sizes, usually called tenders, are required; these range from 500 barrels to 10,000 barrels ..