http://www.publicceo.com/2013/11/pressures-mount-on-californias-ports/
By Greg Lucas, November 20, 2013
On November 1, the Port of Oakland officially began a $500 million
conversion of the long-shuttered Oakland Army Base into new warehouses
and pier-side rail spurs to improve the capacity – and competitiveness –
of Northern California’s busiest port.
Financed in part with $250 million in state bond funds, the massive
undertaking is expected to create 1,523 construction jobs over the next
three years and another 1,800 permanent jobs when completed.
“The community wins with cleaner air, less congestion, more good jobs
and local business
opportunities,” said Chris Lytle, the port’s new
executive director, at the groundbreaking.“The supply chain wins with
faster transit times, higher volume throughput, lower costs and greater
reliability. And government wins with increased revenue and lower
expenditures on fixing up local roads.”
Every four containers create $1,000 in state and local
revenue, $8,500 in personal income and one job. Oakland says every three
containers it handles generate one job, $5,100 in personal income and
$540 in state and local taxes.
Also speaking at the event was Oakland’s former mayor, Gov. Jerry
Brown. His attendance is a testament to the significance of the project
and the important but sometimes overlooked role ports play in
California’s more than $2 trillion economy.
California’s 11 ports, from Humboldt Bay in the north to San Diego in
the south, generate more than $40 billion in annual economic activity.
They create hundreds of thousands of jobs dockside as well as inland
where cargo is loaded onto trucks or trains for delivery across North
America, mainly to Mid-West hubs like Chicago and St. Louis.
The Ports of Long Beach and Los Angeles generate most of that
economic activity. The two represent the nation’s largest cargo
container port and the world’s sixth busiest harbor.
Oakland, gateway to Asian markets for Central Valley growers, is a distant third.
Ports in Canada, Mexico and the Gulf states are boosting
capacity as the Panama Canal nears completion of a $5.25 billion
widening that allows the world’s largest cargo ships to bypass the West
Coast.
About 7 million cargo containers move through the Los Angeles and
Long Beach ports annually. Every four containers create $1,000 in state
and local revenue, $8,500 in personal income and one job. Oakland says
every three containers it handles generate one job, $5,100 in personal
income and $540 in state and local taxes.
Although still a major economic engine, California ports face increasing competitive pressures.
Ports in Canada, Mexico and the Gulf states are boosting capacity as
the Panama Canal nears completion of a $5.25 billion widening that
allows the world’s largest cargo ships to bypass the West Coast.
At the same time, major shipping lines are adding more routes from India and Asia through the Suez Canal.
California also has tougher environmental standards than most other
state and countries as well as congested highways and high land prices.
Oakland’s ability to add 1 million square feet of neighboring warehouse
space is the exception, not the rule.
Ten years ago, Long Beach and Los Angeles received more than 56
percent of Pacific Rim cargo containers. Now it’s 48 percent and
falling.
Of the cargo that is unloaded there, 40 percent could be easily diverted elsewhere, port operators say.
Police, Fire Department boats at Port of Long Beach.
“Cargo has no loyalty. It will find the easiest, most cost-effective
path to move through,” John McLaurin, president of the Pacific Merchant
Shipping Association told Capitol Weekly. “If California can offer that,
great. If not, other gateways will be utilized.”
Gooder Ways to Move Goods
State lawmakers are taking some actions aimed at aiding state ports.
A new law creating another seemingly innocuous– advisory committee
could actually affect the vitality of California’s ports by helping move
goods through the state more efficiently.
Backed by the maritime shipping association, the legislation – AB 14
by Assemblywoman Bonnie Lowenthal, a Long Beach Democrat – establishes
an advisory committee to help the state create a “freight” plan, which
has the potential to boost the competitiveness of California’s three
primary ports.
California created a goods movement plan seven years ago
at the direction of then Gov. Arnold Schwarzenegger, in part to build
the case for a $19.9 billion transportation bond that earmarked $3.1
billion for trade-related improvements. That plan is being updated, the
Caltrans website says.
“An efficient and sustainable goods movement system isn’t just smart
policy, it’s a sound investment, both for the state economy and
potentially in securing more federal transportation funding.” says
Lowenthal.
The Democratic governor signed Lowenthal’s measure without comment — a
little under two years before the Panama Canal project’s expected
completion date.
A January 21 meeting is scheduled for the advisory commission
Creating a plan that details how it would move goods
to destinations throughout the United States could help California
receive additional federal funds for trade-related transportation
projects. As much as 95 percent of costs on selected projects, according
to Caltrans.
The 2012 federal “Moving Ahead for Progress in the 21st Century” Act
encourages states to prepare a freight plan as part of the law’s
requirement a new national goods movement strategy be assembled.
Commonly, individual terminals are operated by different
companies who hold long-term leases with the port. Often terminals at
one port compete against each other to secure a bigger share of the
cars, clothing and household goods arriving mainly from Asia.
California created a goods movement plan seven years ago at the
direction of then Gov. Arnold Schwarzenegger, in part to build the case
for a $19.9 billion transportation bond that earmarked $3.1 billion for
trade-related improvements. That plan is being updated, the Caltrans
website says.
“This is part of our responsibility to the national economy,” said
Caltrans spokesman Mark Dinger. “Nearly 40 percent of the goods imported
from Asia to the United States flow through California’s freight
transportation system.”
Nearly all of those bond funds have been appropriated and most of the projects are under construction.
The state’s $250 million contribution to the Port of Oakland’s
upgrade came from that bond, approved by voters in November 2006 as
Proposition 1B.
Because of their unique nature, ports can be problematic for both state and local policymakers.
Ports aren’t monolithic entities. They’re more like franchisers or landlords.
Ports face the same problem around the country. They have
positive economic impacts with regional benefits that affect a large
constituency. But you probably don’t want to live next to them, says
Jock O’Connell, a trade specialist headquartered in Sacramento.
Commonly, individual terminals are operated by different companies
who hold long-term leases with the port. Often terminals at one port
compete against each other to secure a bigger share of the cars,
clothing and household goods arriving mainly from Asia.
Lots of Greenbacks to Get Green
Ports, California or otherwise, also aren’t environmentally benign.
Mammoth cranes move countless metal containers to dockside staging
areas from 1,000-foot long vessels with diesel engines that gobble more
than 150 tons of fuel each day.
Long lines of idling trucks wait to transport their payloads, often
inching along crowded freeways to busy rail yards where diesel
locomotives prepare to rumble their cargo to destinations across the
continent.
“Ports face the same problem around the country. They have positive
economic impacts with regional benefits that affect a large
constituency. But you probably don’t want to live next to them,” says
Jock O’Connell, a trade specialist headquartered in Sacramento.
For example, Burlington Northern Santa Fe wants to build the
“International Gateway,” a 153-acre rail yard cargo depot near
Interstate 710 at the edge of Long Beach.
The city of Los Angeles and a major corporation are
really treating Long Beach in a deplorable manner — one city is
literally ignoring another city’s residents. We’re asking them to be
clean and to be a good neighbor and help mitigate this, but they’re
basically thumbing their nose at us.
The project’s nearly 4,700-page environmental impact report, began in
2005 and completed in 2011, says the $500 million facility will improve
Southern California’s air quality by reducing the distance trucks must
haul cargo from the ports for transfer.
Currently, the chief truck-to-rail transport center is the Hobart
rail yards in the City of Commerce – more than 24 miles from the docks
along the already congested I-710.
But West Long Beach, the neighborhood next to the new rail yard,
complains that it already chokes on diesel fumes, a condition community
activists say won’t improve with the new rail yard.
“This is really taking advantage of poor people for the advantage of
others,” Long Beach Mayor Bob Foster said in an April interview with the
New York Times.
“The city of Los Angeles and a major corporation are really treating
Long Beach in a deplorable manner — one city is literally ignoring
another city’s residents. We’re asking them to be clean and to be a good
neighbor and help mitigate this, but they’re basically thumbing their
nose at us.”
In August, Long Beach consolidated its lawsuit against the project
with six others filed by the Long Beach Unified School District, several
local nonprofits and the South Coast Air Quality Management District.
Environmental mitigation requirements imposed by the Air Resources
Board and other regulators has added $5 billion to port operational
costs, according to the merchant shipping association.
Air Quality Efforts
Some $1.8 billion of that $5 billion in costs stems
from having to create dockside electrical power for vessels so that
onboard diesel engines can be turned off to reduce emissions.
Air board rules require that half of all container and cruise ships
using the state’s major ports must “plug in” starting January 1. The
technology is known as “cold ironing” – shipping term from the days of
coal-fired engines. When a ship was tied up at port, the iron engines
didn’t need be stoked and, so, became cold.
In a May 7 speech, Foster said ships are the largest remaining source
of pollution at ports and that “plugging in a typical container ship
for a day … is the pollution equivalent of taking 33,000 cars off the
road.”
The Port of Long Beach says it will spend $200 million outfitting its terminals with power hookups.
A $1 billion pot of money was contained in the 2006 bond to reduce
emissions from goods movement with $550,000 of it earmarked for Southern
California and the Inland Empire.
The air board estimates there are about 20,000 trucks
that regularly visit the state’s ports, often idling in long lines
awaiting their loads. Seven years ago, the air board said all pre-1994
truck engines had to be retired or replaced with newer engines by 2009
By January 1, all port trucks must meet 2007 emission standards.
Long Beach and Los Angeles used nearly $100 million of their bond
money to offer $50,000 subsidies to truckers to purchase new trucks with
less polluting engines.
In another pollution control move, Long Beach and Los Angeles changed
their fee structure so that trucks that pick up their cargo in off-peak
hours pay less than those who don’t. Long Beach also rewards ships that
slow down to 12 knots or less within 40 miles of the harbor entrance
with lower dockage fees. The slower a vessel’s speed, the lower the
emissions.
While operational costs may increase because of California’s more
stringent regulation, ports are adapting and shrinking their carbon
footprint.
But there are global forces that might be beyond the ability of the state’s ports to adapt to.
Like McLaurin says, cargo takes the speediest path of least expense to its destination.
The New Panama Canal
For almost a century, the Panama Canal defined
shipping. So much so that vessels that could pass through the canal’s
110-foot wide locks are called “Panamax.” A Panamax ship can carry 5,000
cargo containers known as “twenty-foot equivalent units” or TEUs in
nautical parlance because of their 20 foot by 8 foot size.
But now a new generation of cargo ships, known as “Post Panamax,” are plying the oceans.
They can carry as much as 15,000 containers. Although less than 20
percent of the world’s container fleet, the giant vessels account for 50
percent of the fleet’s capacity – a percentage that’s growing.
These massive vessels are a key reason for Panama’s
decision to widen and modernize the canal, the only port in the world
with terminals in two oceans.
The new canal and its set of 180-foot wide single-lane locks can accommodate ships designed to carry up to 12,600 containers.
What’s not yet known is how much will be charged to move through the
new lock system – an important factor in determining cost-effectiveness.
Similarly, manufacturing centers are now moving west from China to
Vietnam to India. That makes the Suez Canal a potentially speedier route
to reach East Coast markets than trucking or training goods cross
country from California.
On the other hand, some international shipping lines have
long-term operating leases at California terminals and are unlikely to
squander that investment – at least during the life of the lease.
Business is undeniably better for California’s ports in 2013 than
during the recession when the shipping industry lost $20 billion in one
year alone.
There’s wariness about the future but the ports are busy trying to
accentuate their positives – like Oakland and its use of the neighboring
army base property.
The Panama Canal’s fast-approaching opening could add more urgency –
and attention – to efforts like Lowenthal’s to boost the competitiveness
of California’s ports. No one involved disputes what’s at stake:
“Ultimately, it’s about the viability of these ports, particularly Long Beach and Los Angeles,” O’Connell tells Capitol Weekly.
“If we don’t move goods through more productively and efficiently
then we lose business not only to Panama but other ports. And a
substantial diversion of cargo away from California creates any number
of significant and probably long-term effects. “
