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The Chesapeake & Delaware Canal (C&D Canal) is a 14 mile (23 km) long, 450 feet (137 m) wide and 35 feet (11 m) deep ship canal that connects the Delaware River with the Chesapeake Bay in the states of Delaware and Maryland in the United States. In the mid‑17th century, mapmaker Augustine Herman observed that these great bodies of water were separated only by a narrow strip of land. In 1764, a survey of possible water routes across the Delmarva Peninsula was made, but little action followed. The idea was raised again in 1788 by regional business leaders, including noted Philadelphians Benjamin Franklin and Benjamin Rush. Despite the beginnings of a commercial venture in 1802—coincident with Canal Mania in England and Wales—it wasn't until 1829 before the C&D Canal Company could, at last, announce the waterway "open for business". Its construction cost of $3.5 million (equivalent to $3.5 in 1829 is equivalent to about <calculated amount> in recent years million in ) made it one of the most expensive canal projects of its time. In the present era, the C&D Canal is owned and operated by the U. S. Army Corps of Engineers, Philadelphia District. The project office in Chesapeake City, Maryland, is also the site of the C&D Canal Museum and Bethel Bridge Lighthouse. The canal saves approximately 300 miles on the route between Wilmington or Philadelphia on the Delaware River and Baltimore on Chesapeake Bay, avoiding a course around the Delmarva Peninsula. The canal is itself a significant landmark and cultural boundary for the state of Delaware, considered a divide between the urbanized northern portion of the state and the rural southern portion known locally as "Lower Delaware", and demarcates an unofficial northern limit to the Delmarva Peninsula.

In the mid‑17th century, Augustine Herman, a mapmaker and Prague native who had served as an envoy for the Dutch, observed that two great bodies of water, the Delaware River and Chesapeake Bay, were separated only by a narrow strip of land. Herman proposed that a waterway be built to connect the two. More than a century passed before any action was taken. In 1764, a survey of possible water routes across the Delmarva Peninsula was made. One was proposed by Thomas Gilpin, Sr., a Quaker from Philadelphia, Pennsylvania, who, along with other members of the American Philosophical Society, sought a waterway to shorten the shipping distance from the Chesapeake Bay to Philadelphia. He proposed a canal across the Delmarva Peninsula to connect the Chester River at modern day Millington, Maryland, to the Delaware River. He even bought of land, largely in and around Millington, but the canal would not become a reality for decades. The idea was raised again in 1788 by regional business leaders, including noted Philadelphians Benjamin Franklin and Benjamin Rush. The canal would reduce, by nearly 300 miles (500 km), the water routes between Philadelphia and Baltimore. In 1802, following actions by the legislatures of Maryland, Delaware, and Pennsylvania, the Chesapeake & Delaware Canal Company was incorporated, with merchant and banker Joseph Tatnall as president. More surveys followed, and in 1804, construction of the canal began under Benjamin Latrobe. made it one of the most expensive canal projects of its time. In 1825, due to the efforts of Benjamin Wright, the company fired the canal's chief engineer, John Randel Jr., who had surveyed its route and built the difficult eastern section. Randel sued the company for breach of contract, and in 1834 a jury returned an award to Randel of $226,885.84 , a tremendous amount for the time. The canal company's appeals went as high as the United States Supreme Court, which affirmed the award. The company attempted to avoid paying the judgment, but the state legislatures of both Maryland and Delaware passed bills requiring the canal company to pay off its debts within five years. The huge award almost bankrupted the company.

The Chesapeake Bay and Delaware River were now connected by a navigation channel measuring nearly 14 mile (23 km) long, 10 feet (3 m) deep, 66 feet (20 m) wide at the waterline and 36 feet (11 m) wide along the channel bottom. A covered wooden bridge at Summit, Delaware, spanned the canal across the "Deep Cut", measuring 250 feet (76 m) between abutments. The bridge floor was 90 feet (27 m) above the channel bottom. Three wooden swing bridges also crossed the canal. Locks to pass vessels through the waterway's various levels were constructed at Delaware City, Delaware and St. Georges, Delaware, and two at Chesapeake City. Each measured 100 feet (30 m) long and 22 feet (7 m) wide and was eventually enlarged to 220 feet (67 m) in length and 24 feet (7 m) in width. Teams of mules and horses towed freight and passenger barges, schooners and sloops through the canal. Cargoes included practically every useful item of daily life: lumber, grain, farm products, fish, cotton, coal, iron, and whiskey. Packet ships were eventually established to move freight through the waterway. One such enterprise—the Ericsson Line that operated between Baltimore and Philadelphia, and continued to carry passengers and freight through the canal into the 1940s. The cargo tonnage peaked in 1872 with more than 1.3 million tons transiting the canal. Along the route across the top of the Delmarva Peninsula, at least six lighthouses warned barges and other vessels passing through the canal when they were approaching bridges and locks. These small wooden lighthouses had had red lanterns mounted atop them. The Ericsson Line of steamboats originated as steamers built for freight only; however, the line converted to passenger boats during 1876 at the time of the Centennial Exposition in Philadelphia as the demand for travel increased. The Baltimore and Philadelphia Steamship Companies, which operated the Ericsson line, built and furnished ships with seventy to eighty staterooms in addition to the freight facilities. In turn, these ships grew from less than one hundred to more than six hundred tons and greatly increased travel from Baltimore to Philadelphia. The Ericsson Line was named after its first ship, Ericsson, which was named after John Ericsson who developed the screw propeller that was installed on the vessel specifically designed for the Chesapeake & Delaware Canal. Ericsson was built at Reanie & Neafie's shipyard in Philadelphia by Anthony Groves, Jr. The ship, finished in 1843, was 78 feet (24 m) in length and weighed eighty tons. It began operations in 1844 under the direction of Captain Noah F. Ireland. The Ericsson Line operated out of Baltimore's No. 1 Light Street Pier for 75 years, serving passenger and freight demands throughout the waterway with thirty registered steamers. The Ericsson Line's success brought utility and prosperity to the canal and promoted an expansion of trade by means of its growth and connection to the Atlantic Deeper Waterways Association of the Chesapeake & Delaware Canal. Loss of water in the locks was a problem from early on. As boats passed through at Chesapeake City, the equivalent of a full lock of water was lost to the lower lying portion of the canal. This loss, compounded by leakage through the canal banks and normal evaporation, made it necessary to devise a means of lifting water into the project's upper part. A steam operated pump was purchased in 1837 to raise water from Back Creek, and in 1852 a steam engine and large waterwheel were installed at the pumphouse in Chesapeake City. Measuring 39 feet (12 m) in diameter and 10 feet (3 m) wide, the iron and wood waterwheel had 12 troughs which filled with water as it turned; the water then spilled over the hub into the raceway and into the uppermost canal level. By 1854 a second steam engine was in use. The two engines consumed eight tons of coal daily while lifting 170 tons of water per minute into the canal. The waterwheel and steam engines remained in continuous use through the mid‑1920s. Throughout the 19th century, the canal's use continued to change with the New Castle and Frenchtown Turnpike and Rail Road being its only major competitor. Steam power brought larger and deeper draft vessels that could not pass through the restricting locks. By the turn of the 20th century the decline in canal traffic and cost of operation and repairs reduced canal profits. Clearly a larger, wider, and deeper waterway was needed. At the time, however, little thought was given to improving the existing canal. New companies were formed instead, considering at least six new canal routes, but committees and commissions appointed to study the issue failed to agree on a plan. In 1906 President Theodore Roosevelt appointed a new commission to report on the feasibility of converting the canal to a "free and open waterway."

In 1919 the federal government bought the canal for $2.5 million and designated it the "Intra coastal Waterway Delaware River to Chesapeake Bay, Delaware and Maryland." The purchase included six bridges and a railroad span owned by the Pennsylvania Railroad. These were replaced during the 1920s by four vertical lift spans and a new railroad bridge. Responsibility for operating, maintaining, and improving the waterway was assigned to the U. S. Army Corps of Engineers, Wilmington District. In the mid 1920s, work began to move the eastern entrance at Delaware City several miles south to Reedy Point, Delaware. All locks (except the one at Delaware City) were removed, and the waterway was converted to a sea level operation at 12 feet (4 m) deep and 90 feet (27 m) wide. These improvements cost $10 million. Two stone jetties at the new eastern entrance were completed in 1926. The sole remaining lock at Delaware City — a stone structure, resting on wooden underpinnings, with a wooden floor — would eventually be preserved and, in 1975, listed on the National Register of Historic Places. New bridges to accommodate highway traffic crossing the canal also became necessary as deepening and widening progressed. Two mechanical lift bridges at St. Georges and Chesapeake City were toppled by ship collisions and replaced in the 1940s with high level highway spans (the former, the St. Georges Bridge, has largely been bypassed by the new Senator William V. Roth Jr. Bridge, opened in 1995). Two other high level vehicular traffic bridges, Summit Bridge in 1960 and Reedy Point Bridge in 1968, were constructed as part of the 1954 improvement authorization. In 1966, a new railroad lift bridge (the Chesapeake & Delaware Canal Lift Bridge) was also completed by the Corps and turned over to the Pennsylvania Railroad to carry freight across the canal. The railroad and Summit spans were recognized by the American Institute of Steel Construction as the most beautiful bridges of their types in the years they were completed. After the modern sea level canal opened in 1927, pilot boats operated by the Army Corps of Engineers worked at each end of the waterway, one assigned to Reedy Point on the Delaware River and the other stationed at Town Point on the Elk River in Maryland. These patrol boats met incoming ships, checked traffic, did patrols, and sometimes made rescues. But modernization had arrived on Canal as closed circuit televisions, radar, and advanced in radio communications made the work of meeting incoming boats and other tasks obsolete. On Nov. 19, 1968, the work of the patrol boats was retired, and modern, centralized technology took over the tasks.

Today's canal is a modern sea level, electronically controlled commercial waterway, carrying 40 percent of all ship traffic in and out of the Port of Baltimore. Since 1933 the Corps' Philadelphia District has managed canal and highway bridge operations from a two story white frame building on the canal's southern bank at Chesapeake City, Maryland. Cargo ships, tankers, container carrying vessels (all up to Seawaymax classification), barges accompanied by tugboats, and countless recreational boats create a steady flow of traffic. Through state of the art fiber optic and microwave links, dispatchers use closed circuit television and radio systems to monitor and safely move commercial traffic through the waterway. Navigating oceangoing vessels requires extensive maritime skills, with strong currents or bad weather conditions adding to the risks. A United States Coast Guard certified pilot is required for vessels engaged in foreign trade transiting the canal, the Delaware River and Bay, and Chesapeake Bay. Many shipping firms use pilots from the Delaware River and Bay or Maryland pilots' associations. Typically a Delaware River and Bay pilot boards a ship as it passes Lewes, Delaware, entering the Delaware Bay, and guides the vessel up the bay and into the canal to Chesapeake City. A Maryland pilot then takes over and continues the ship's transit into the Chesapeake Bay to Baltimore or Annapolis, Maryland. The procedure is reversed for eastbound ships. At Chesapeake City a "changing of the pilots" takes place, while the pilot launch maneuvers alongside a vessel as it continues its journey without stopping. The pilots use the ship's gangway, pilot ladder, or port entrance to climb aboard or leave the vessel.

The U. S. Army Corps of Engineers operates the C&D Canal Museum at Chesapeake City, Maryland, housed in the original canal pumphouse with a waterwheel and pumping engines. The museum illustrates the canal's history and operations. Current operations can be viewed through a television monitor affording visitors up to the minute locations on ships traveling through the canal. Admission is free, and the museum is open Monday Friday year round except for government holidays. A full sized replica of the 30 feet (9 m) Bethel Bridge Lighthouse is located on Corps property, a short walk from the museum. The original lighthouse was used to warn vessels of locks and bridges in the days before the 1927 canal changes made it sea level.