Sea Ports Need Federal Backing to Ensure Efficient Transport
01 Oct, 2012
By Rachel Duran
Port authorities and their private partners, such as terminal operators, are planning massive investments in their facilities at sea ports throughout the country. The ports are adding capacity, updating docks, and preparing to handle larger vessels and increases in cargo to support trade initiatives, such as the development of domestic oil and gas shale plays.
At Port Corpus Christi, NuStar Logistics is using existing docks but also building a new private barge dock to handle inland and ocean going barges to move crude from the Eagle Ford Shale formation to U.S. refineries, says John LaRue, executive director, Port Corpus Christi.
“Our port was import based with large crude tankers coming in from around the world,” LaRue says. “Now with Eagle Ford, because basically most of the oil is staying in the U.S., the port will be mostly barge. So as quickly as we can we are either rehabbing or constructing new docks that can handle barges.”
Other projects include Martin Midstream Partners, which has built a storage tank farm. LaRue says a land swap opened up land adjacent to the docks in order to support general cargo activities such as Cornell Carriers’ frac sand shipping operation.
In yet another project, Flint Hills Resources LP, part of Koch Industries Inc., leased a part of the former Ingleside naval station, which was closed in 2005 under BRAC, and which is owned the port. The company has purchased a pier, built a dock and recently began using the facility to move crude from the Eagle Ford.
“We are also waiting to close to sell the rest of the base to Occidental Petroleum Corp., which is going to conduct liquefaction and separation of natural gas from Eagle Ford,” LaRue says. In another natural gas project, Cheniere Energy Inc.’s wholly owned subsidiary, Corpus Christi Liquefaction LLC, is in the permitting process to establish a gas liquefaction plant at Port Corpus Christi. The company is nearly finished with the construction process on a similar facility in the Beaumont and Port Arthur, Texas, region. The Corpus Christi project will be a $7.5 billion project, LaRue says, where the company will sell gas from the Eagle Ford to mainly Asia markets.
What is missing from the investment picture at ports are the full funding awards the federal government has authorized to support the connection of infrastructure on the water side to the land side. These connections will provide better access and ensure there are no bottlenecks once the goods are outside of the gates.
A positive for sea ports was the inclusion of infrastructure activities at ports in the reauthorization of the surface transportation bill, also known as the Moving Ahead for Progress in the 21st Century Act. A freight mobility provision in the bill would establish a national freight policy, and the development of a national freight strategic plan.
The bill also recognized the need for and the economic importance of maintaining federal navigation channels at their constructed dimensions. “The language in the bill acknowledges the shortfall in spending for the maintenance,” says Aaron Ellis, spokesperson, American Association of Port Authorities (AAPA). “It calls on the administration to request full funding that is consistent with revenue that is collected from the [federal harbor maintenance] tax for the specific purpose of maintaining the channels.”
The AAPA is comprised of deep draft public port authorities and their allies throughout the United States, Canada, Latin America and the Caribbean.
In addition to funds to support channel maintenance, ports would also benefit from the funding authorizations allotted to them to support developments in port infrastructure and security, and with environmental programs.
In regard to port infrastructure support, Ellis says AAPA looks at ways to ensure the funds for infrastructure to connect with ports are made available against competition for federal funds elsewhere.
The cuts are deep in the Port Security Grant Program, which is authorized at $400 million annually and which was cut by more than 75 percent.
Funding has also been cut from a successful EPA program called the Diesel Emission Reduction Act, which supports the replacement of older diesel engines with new lower sulfur burning engines. Funding has been slashed from $200 million to $20 million. “Having grants cut so dramatically makes it difficult to meet targets,” Ellis says.
The members of the AAPA are concerned that while they are spending billions of dollars, the federal government is falling short in awarding the funds authorized to support ports with projects, such as maintaining navigation channels.
In a port infrastructure investment survey of its membership, AAPA found its members plan to spend $46 billion on dock improvements to major manufacturing facilities and refining facilities for energy, for example, Ellis says.
Critical Infrastructure Connections
Investment highlights at ports include the Port of Vancouver USA’s West Vancouver Freight Access Project, which provides better rail connectivity and makes customers more competitive. The $275 million investment has enticed companies such as United Grain Corp. to invest $80 million at the port. BHP Billiton, the world’s largest mining company, will use the rail system to move potash that comes in from Saskatchewan to the port and out for export. The company expects to export nearly 8 million tons of potash annually from the port. Construction of its storage facility and new dock and rail car unloading facility will begin next summer.
“It is all about remaining competitive,” says Curtis Shuck, director of economic development and facilities at the port. “It is a thin line with a narrow margin and everything we can do to continue to support that is critical.” Shuck says the strong rail access was also important to Farwest Steel Corp. in its decision to locate a new $48 million, 330,000-square-foot fabrication and distribution facility to the port.
The company’s business model requires that it owns the real estate, which is not typical at ports, which lease land and facilities. “Because we identified this as a critical opportunity for the community, the port commissioners made the difficult decision to sell the company the 20 acres,” Shuck says. At the time of the Farwest Steel project, the Vancouver region was leading the state of Washington in regard to its unemployment rate and officials felt the project would be a game changer. Shuck adds that the port is more than a typical landlord and when officials make a decision to “go after a project, we go all in.”
Shuck notes that the Port of Vancouver USA is 98 percent occupied on the industrial side and is adding developments to increase inventory. Centennial Industrial Park is 58 acres and benefits from grant money awarded through the state’s Jobs Now Act of 2012, which allows for the acceleration in the delivery of parcels that are shovel ready.
Moving to the southeast United States, the visionary leadership at the Port of Virginia has created a surplus of opportunities to support future development and expansion activities. The port system consists of the Norfolk International Terminals, the Portsmouth Marine Terminal, the Newport News Marine Terminal, and an inland intermodal facility in Front Royal.
“The leadership from the past has built the infrastructure that is available today to handle the biggest ships that are available,” says Russell J. Held, deputy executive director of development, Virginia Port Authority, which manages the ports. One asset is Craney Island, which was first looked at to be operational in 2017. During the planning stages APM Terminals announced a $540 million private terminal at Portsmouth, located up the river from Craney Island. “That gave us a stepping stone to push the need for capacity at Craney Island into the future,” Held says. “The next trigger we pull will be the expansion of APM Terminals [phase two] and that means Craney Island gets pushed out to when demand calls for, perhaps in 2030.” The terminal is operated by the Virginia International Terminals.
Held says there is no place like Craney Island in the country, which is a permitted site that will offer unrestrained capacity and easy flows of cargo. Craney Island’s 520-acre terminal will add another 5 million TEUs to the capacity of the Port of Virginia, says Scott Hall, business development manager, city of Virginia Beach Department of Economic Development. “We are a diverse business location that can support most businesses, such as manufacturing, logistics or technology companies.”
Hall adds that the city of Virginia Beach is home to 200 international companies from 30 countries, making products from power tools to intelligent transportation systems. “People here speak their language; it is a melting pot of cultures and business practices,” Hall says.
Moving southwest to southern Louisiana, port officials are finishing the construction of a finger pier, which will accept two Panamax vessels at a dock at the same time, at the Globalplex Intermodal Terminal in Reserve. A $3 million rail project planned for the Globalplex will go out to bid soon, which would make a connection between the Kansas City Southern Railway and Canadian National Railway, says Joel Chaisson, executive director, Port of South Louisiana.
The Port of South Louisiana is the largest tonnage port in the Western Hemisphere, featuring 54 miles of deep water along the Mississippi River between New Orleans and Baton Rouge. The port comprises the parishes of St. Charles, St. John the Baptist and St. James. The facilities handled more than 246 million short tons of cargo in 2010.
Chaisson says that in addition to investments port authorities and their partners make, it is critical they also receive infrastructure support from the federal government and states. “International trade is critically important,” Chaisson says.
When goods move efficiently in and out of sea ports, consumers get their goods, jobs are created, and the nation’s economy is strengthened, says the AAPA’s Ellis.
For complete details about the organizations featured in this article, visit:
American Association of Port Authorities
City of Virginia Beach (Va.) Department of Economic Development
Port Corpus Christi (Texas)
Port of South Louisiana
Port of Vancouver (Wash.) USA
Port of Virginia