Opinion | Make the companies that use the Soo Locks pay for a new one

Shutting down the Soo Locks would devastate the U.S. economy, but taxpayers shouldn’t bear the burden of building a new lock by themselves. (U.S. Army Corps of Engineers photo by Kim Dautremont used under Creative Commons license)

Michigan Gov. Rick Snyder made a small step in the right direction by proposing to spend up to $50 million towards the construction of a second Poe lock in Sault Sainte Marie.

He’s also going to ask other Great Lakes states to make a comparable contribution to this new infrastructure. But Snyder and the Michigan Legislature should modify the plan so that the immediate beneficiaries of the proposed second Poe lock — the steel industry — pay part of the estimated $1 billion needed in total for the project.

The Poe lock is one of two operating Soo Locks, which connects Lake Superior with the other Great Lakes. It is the only lock that can handle the 1,000-foot lakers that are used to bring iron ore from Minnesota and the Upper Peninsula to the various steel mills located on and around the other Great Lakes.

William B. Newman Jr is a former executive at Conrail and now an adjunct scholar at the Mackinac Center for Public Policy

A 2015 Department of Homeland Security study found that if the Poe lock were shut down for a period of six months or longer, unemployment would rise by 5.8 percentage points and the U.S. gross domestic product would shrink by $1.1 trillion, or roughly 6 percent. Hence, the demand for a second Poe lock.

Congress authorized the construction of a second Poe lock, initially $277 million in 1986, and most recently, $341 million, in 2007. Although of significant importance to commerce and the nation, Congress has failed to appropriate significant funds for the project, in part because the U.S. Corps of Engineers concluded this project failed a cost-benefit analysis in 2005. The Corps is expected to announce results from a re-evaluation of that analysis this month.

Even though the Soo Locks provide transit for lakers and other ships through the 21-mile passage from St. Mary’s River to Lake Huron, the Soo Locks are not part of the U.S. Inland Waterway System.

If they were, and they should be, the users of these locks would be required to pay user fees that would cover 50 percent of the capital costs of constructing improvements and new infrastructure, such as a second Poe lock.

Ever since the original authorization of the second Poe lock in 1986, the iron ore producers and steel industry have lobbied successfully to have federal taxpayers absorb a great percentage of the cost of this project. The original authorization required 20 percent of the funds come in the form of user fees. Most recently, in 2007, these industries persuaded Congress to require federal taxpayers to absorb 100 percent of the costs.

Snyder’s proposal to have Great Lakes state taxpayers absorb 20 percent of the cost of this project moves the dial ever so slightly toward maximizing efficiency by having those who more directly benefit from this project, pay for it.

But the real and immediate beneficiaries are the iron ore and steel producers and other users of the current Poe lock, so it would be both more efficient and fairer if Great Lake taxpayers merely lent these funds to the beneficiaries, who would ultimately pay the bill.

The Trump administration recently made a good case for why industry beneficiaries should pay these user fees.

The recent Economic Report of the President argues, “The rationale for imposing user fees is especially strong when the services in question provide significant private benefits relative to the overall public benefits generated by use of the asset.”

This report suggests that policymakers in Washington, D.C., and Lansing should revisit the financing of this project. The Soo Locks should be treated like other infrastructure in the Inland Waterway System, and users of these locks should pay fees just as users of the Inland Waterway System do. Currently, shippers get a free ride on the operations and maintenance costs of the Soo Locks, paying nothing towards that end.

But they should help fund these costs too, as President Trump’s recent economic report also recommended.

Sen. Everett Dirksen of Illinois is known for his famous quote: “A billion here, a billion there, and pretty soon you're talking about real money.”

This project now hits that threshold. For a country that has $22 trillion in debt, there is no reason that taxpayers, federal or state, should absorb 100 percent of the cost of building a second Poe lock.

Instead, its principal beneficiaries — iron ore and steel producers — should.

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Thu, 06/14/2018 - 9:46am

I get a little nervous when I believe that someone from the Mackinac Center has a point, because the organization doesn't typically project an outlook that Democrats espouse. People in this state don't want to "pony up" money even when a project benefits them primarily. Seems politicians are quick to take federal money without a fair share paid by state and local government. Examples that come to mind: recent I-75 construction around Troy and Auburn Hills, using federal money to pay for damage to people in Flint caused by state and local government, overweight truck permit fees that instead pay for builders fees.

Thu, 06/14/2018 - 10:16am

A lock on a river is no different from a bridge on an interstate highway. If you are against any government participation in these massive projects, then push for the railroad model, where the railroads bought and own the right of way and constructed the railway using their own money. Of course when you let competition (trucks) use the highway, then the railroads have a hard time staying competitive and making a profit, and in the late 1900’s almost went out of business.

One could argue that the benefit of the new lock goes a lot further than just the steel companies. The workers in the steel companies are also beneficiaries of the lock, as are the grain producers in the upper mid west and everyone who eats bread made from that grain. Bottom line is that there are a lot more that benefit from the new lock than just the steel companies.

Thu, 06/14/2018 - 11:27am

I think if we shut it down, the users will come up with a solution quickly. I do not mind paying the fee when I cross the bridge and the businesses that are benefitting from the Soo Locks should not mind paying for this cost of doing business. Can the financing for this not
project be based on future fees?

Paul Jordan
Thu, 06/14/2018 - 4:27pm

It's kind of scary to find myself agreeing with someone from the Mackinac Center.

Jane McGinnis
Thu, 06/14/2018 - 8:09pm

I have always wondered why users of the Soo Locks don’t pay a toll - similar to the Panama Canal. We pay a toll to cross the Mackinac Bridge - and of course there are numerous other examples throughout the country of toll roads and bridges. There should be a toll on the Soo Locks.

William H.
Sun, 12/30/2018 - 9:07am

There hasn't been any "user fees" at the Soo Locks for users (for-profit ship owners) be they American, Canadian, Russian, Liberian (flags of convenience - aka, NO TAXES), Chinese, (any flag-states) since these Locks were built. At the same time the American taxpayer foots the (billion$) bill for all the free passage, the Canadian government charges American ships to pass through the Welland Canal locks and St. Lawrence Seaway locks. Da? And the American taxpayer "free-bee shipping gift" also extends to the American owned and operated, Eisenhower & Snell Locks in the St. Lawrence Seaway. So why not build 730' x 76' wide ships (like the Canadians do) and use the taxpayer's "Billion $" to guarantee the top 20% of new ship mortgages through the American Maritime Administration? Creates a lot more (American ship building) jobs instead of reducing jobs (bigger ships; less crews - again, Da). Then have "user fees" for all profit-making companies (like the Canadians do - Da) for each lock. Not hard to solve this problem. Just have to - not listen to Lake Carriers Association.

Mon, 05/20/2019 - 7:56am

100% of the Operation & Maintenance of the Soo Locks is paid by the Harbor Maintenance Trust Fund. All shippers foreign or domestic pay a tax at their destination port that goes into this fund.