Delaware River Deepening Project:

Comprehensive Reanalysis Corrected Errors, but Several Issues Still Need to Be Addressed

GAO-10-420: Published: Mar 31, 2010. Publicly Released: Apr 2, 2010.

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In 1992 Congress authorized the U.S. Army Corps of Engineers (Corps) to implement the Delaware River deepening project, which would deepen the river's shipping channel from 40 to 45 feet. In 2002 GAO reviewed the Corps' economic analysis of the project, concluding that it contained significant limitations. GAO recommended that the Corps prepare a comprehensive economic reanalysis, which the Corps completed in 2004. GAO was asked to determine the extent to which (1) the reanalysis addressed the limitations GAO identified; (2) the reanalysis's benefit projections, as updated, reflect current and anticipated market and industry conditions; and (3) the Corps has accounted for other key issues that could affect the project. GAO reviewed Corps project documentation and interviewed federal officials along with representatives of affected states, firms, and environmental groups.

The Corps' reanalysis addressed many of the limitations GAO had identified in 2002 in the Delaware River deepening project's original economic analysis by using updated information to correct invalid assumptions and outdated data, recalculating benefits and costs to correct miscalculations, and accounting for some of the economic uncertainty associated with the project. For example, the Corps revised its benefit estimates for transportation cost savings related to such commodities as crude oil, containerized cargo, and steel slabs. In addition, as GAO recommended, the Corps had independent experts review the reanalysis. Although the Corps' efforts were responsive overall to GAO's 2002 recommendations, GAO identified several additional limitations in the reanalysis. For example, in its analysis of economic uncertainty, the Corps considered the effects of negative-growth scenarios only for crude oil and refined petroleum, but not for the remaining commodities. In the 6 years that have elapsed since the Corps completed its reanalysis, current and anticipated future market and industry conditions have changed significantly. Several of the assumptions that underlie the Corps' estimates of the project's benefits are inconsistent with these changes. For example, the Department of Energy has lowered its long-term forecasts for growth in East Coast refinery capacity and U.S. imports of crude oil. Also, in the fall of 2009, Delaware River refinery firms closed two major facilities. Further, steel imports have declined since 2006 according to the benefiting facility identified in the reanalysis, and were well below the reanalysis's growth projection for 2009. However, the Corps' 2008 and 2009 economic updates for the project did not analyze the potential effect of these changes on the project's benefit estimates. The updates also did not determine the current status of shipping services on two trade routes that provide all of the benefits related to containerized cargo. Because of these and other omissions, decision makers do not have sufficient updated information to judge the extent to which market and industry changes would affect the project's net benefits. GAO identified three key outstanding issues that could affect the Delaware River deepening project. First, the Corps lowered its estimate of the volume of dredged material, which eliminated the need for new disposal sites in New Jersey, but its disposal plan continues to face resistance from that state. Second, Delaware, New Jersey, and several environmental groups filed separate lawsuits against the Corps in the fall of 2009, charging that the Corps lacks the environmental approvals needed to proceed with the project, among other concerns. Finally, New Jersey and several environmental groups have challenged in court the Corps' National Environmental Policy Act (NEPA) process for the project. Although the Corps completed an environmental assessment (EA) in April 2009, stakeholders believe that the process for soliciting public comment on its scope was unclear, did not allow enough time for comment, and that a new supplemental environmental impact statement is needed. Also, at the Army's direction, the Corps did not provide a public comment period for the draft EA as it had proposed to do.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2011, the Corps issued an Economic Analysis Summary Report on the Delaware River Main Channel Deepening Project. The report is based on the findings of a May 2011 Updated Economic Assessment of Relevant Market and Industry Trends and an April 2008 Economic Update Report. The Economic Analysis Summary Report consists of two possible alternative future conditions for oil-related benefits and two possible alternative future conditions for container traffic benefits resulting in four possible future scenarios for the combination of oil-related and container traffic benefits. The report concludes that the Delaware River Main Channel Deepening Project proves to have robust benefits and a positive benefit to cost ratios in each economic reanalysis. All three documents are part of the project's official record and are available on the Philadelphia District's website.

    Recommendation: To better ensure that decision makers have the most current information about changes that could affect the benefits of the Delaware River deepening project, the Secretary of Defense should direct the Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers to provide an updated assessment to the Assistant Secretary of the Army for Civil Works, and to Congress, of relevant market and industry trends and outlook that specifies the extent to which the data and assumptions underlying each benefit category have changed, and the effect of any changes on each benefit estimate and the project's net benefit estimate. This assessment should be issued as a public document and become part of the project's official record.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: In its March 2010 response to our report, the Corps partially concurred with this recommendation, stating that it had no reason to believe its existing regulations and guidance regarding this subject are defective or in need of modification, but nonetheless agreeing to review and evaluate its existing guidance. In January 2012, the Corps reported that it completed this review and concluded that additional guidance is unnecessary. The Corps stated that the Council on Environmental Quality was established within the Executive Office of the President by Congress to promulgate national environmental policy such as suggested by the GAO report. The Corps stated that the Council was at that time soliciting interagency comments on efficient and timely environmental reviews. In addition, the Corps stated that specific to the Delaware River Deepening Project, the Corps Philadelphia District has addressed this recommendation by conducting an additional environmental analysis of the project with public coordination, resulting in a September 2011 Finding of No Significant Finding Impact that is publicly available on the District's website.

    Recommendation: To improve consistency and transparency in how the Corps handles public participation in the development of environmental documents that are related to controversial projects and that the Corps believes have no applicable NEPA requirement, the Chief of Engineers should develop guidance on the appropriate timing and approaches for public notice and comment on such documents.

    Agency Affected: Department of Defense: Department of the Army: Corps of Engineers

 

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