Government Study Sees Unemployment Rate Topping Great Recession if Poe Lock Fails

March 4, 2016 LCA

CLEVELAND – Almost 11 million unemployed Americans and a $1.1 trillion decrease in economic activity are just two of many catastrophic consequences forecast by a Department of Homeland Security’s (DHS) Office of Cyber and Infrastructure Analysis of a 6-month failure of the 47-year-old Poe Lock at Sault Ste. Marie, Michigan.  Titled “The Perils of Efficiency: An Analysis of an Unexpected Closure of the Poe Lock and its Impact,” the report is an in-depth look at the ramifications of a failure of the largest of the locks at the “Soo” which connect Lake Superior to the lower four Great Lakes and St. Lawrence Seaway.

The analysis finds a failure of the Poe Lock would quickly cripple the economy.  Approximately 75 percent of U.S. integrated steel production would cease with 2-6 weeks of the lock failing.  Roughly 80 percent of iron ore mining and nearly 100 percent of North American production of automobiles, appliances, heavy equipment and railcars would then shut down.  Almost 11 million people in the U.S. and millions more in Canada and Mexico would be unemployed and plunge the economy into a recession more severe than the “Great Recession” of 2008-2009.

Michigan and Indiana would suffer the highest unemployment rates, 22.6 percent and 22.0 percent respectively.  Ohio’s unemployment rate would jump to 17.2 percent.  Kentucky and Tennessee would follow at 16.7 percent and 15.3 percent, respectively.

California, Illinois, New York, and Texas would each lose more than 500,000 jobs.

Four thousand commercial vessels transit the locks at Sault Ste. Marie, Michigan, each year carrying more than 80 million tons of iron ore, low-sulfur coal, grain, limestone and breakbulk cargos from or destined for domestic and foreign ports.  However, 70 percent of all tonnage moved in U.S.-flag vessels funnels through the Poe Lock because it alone can accommodate the largest and most efficient vessels working the Lakes.

Last summer emergency repairs closed the 73-year-old MacArthur Lock, the smaller of the two functional locks at the Soo, for 20 days.  Nearly 2 million tons of various cargos were delayed, but had the Poe Lock suffered a similar outage, the delays and cascading ramifications would have been much greater.

A second Poe-sized lock to provide redundancy at the Soo has twice been authorized by Congress, the second time in 2007 at full federal expense.  However, funds for its construction have not been appropriated because of a flawed analysis of the project’s benefit/cost ratio.

The report’s release comes as the U. S. Army Corps of Engineers (Corps) undertakes an economic reevaluation of that flawed benefit to cost analysis.  The original analysis erroneously assumed iron ore and other materials currently moved on the Lakes through the Soo Locks had unlimited alternate modes of transportation available, but further research has proved neither trains nor trucks could fill the void if the Poe Lock failed for any period of time.

Responding to a question at a recent Congressional hearing on the Corps’ budget, Assistant Secretary of the Army for Civil Works Jo-Ellen Darcy stated that the Corps would take the DHS study into account in conducting that economic reevaluation.

The full report can be accessed by clicking here.

Lake Carriers’ Association represents 15 American companies that operate 56 U.S.-flag vessels on the Great Lakes and carry the raw materials that drive the nation’s economy: iron ore and fluxstone for the steel industry, aggregate and cement for the construction industry, coal for power generation, as well as salt, sand and grain.  Collectively, these vessels can transport more than 100 million tons of cargo per year.

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