Tuesday, September 30, 2014

OPINION: Europe is Breaking the Egg

By John E. Graykowski

We may soon be able to retire the tiresome “chicken and egg” cliché to describe LNG development, since there has been movement in the last year in Europe and the United States that indicates the circle may be breaking; but it’s too soon to tell whether the movement is temporary or permanent. What is apparent, however, it that Europe has moved forward in a more focused and strategic way, to create LNG infrastructure and markets, which is yielding results. By 2016, permanent LNG bunkering facilities will be in operation in Rotterdam and Antwerp – both among the largest ports in the world – thereby signaling that the supply uncertainties have been resolved. It bears asking, therefore, how Europe has done this, and whether we should consider similar measures here if the goal is to expand LNG as a marine and transportation fuel throughout the United States.

In 2008, Norway effectively made LNG the preferred fuel choice for marine operators through a combination of regulatory mandates relating to Nitrogen Oxide (NOx) and financial incentives covering up to 80 percent of the capital cost of the LNG-related components. Following these actions, the number of Norwegian vessels using LNG as a primary fuel went from 3 to 12 vessels in five years, with more than 50 vessels of various types now under construction along with the supporting LNG infrastructure. Concurrent with this, Norway is addressing the regulatory and operational issues, and is now seen as a leader in marine LNG development.

The European Union (EU) is also pursuing a comprehensive effort to increase LNG as a marine fuel with the goal of developing LNG infrastructure in every major seaport by 2020, and every inland terminal by 2025; a total of 139 ports across Europe. This goal coincides with estimates that by 2020, 1,700 dual fuel vessels will be built or converted worldwide, with many of these operating in, or calling on, the EU.

By 2020, the United Arab Shipping Corporation (USAC) dual fuel container vessels will be operating between the Far East and Europe. This activity will spawn additional interest and movement in Europe and among its global trading partners leading to a rapid transition from diesel to LNG as a major transportation fuel.

The EU is employing a “carrot and stick” approach combining financial support for the conversion and construction of vessels and infrastructure with increased regulation. Projects such as the Trans-European Network for Transport (Ten-T) and the Rhine-Main-Danube initiatives have produced significant results. $139 million has already been allocated to 7 Ten-T projects to support vessel conversion and LNG infrastructure development, with more funding promised. Support of up to 50 percent of project costs is available for vessel conversion, construction and infrastructure, and just recently the first inland dual fuel barge was delivered and will shortly begin operations.

The EU adopted an approach that combines: (1) clear and defined goals that LNG will displace traditional marine fuels; (2) increased environmental regulations; (3) financial incentives to spur the initial transition; and (4) coordination among ports, governments; regulatory agencies and stakeholders to create uniform regulatory structures. Given the intrinsic advantages of LNG, there is recognition that the market would likely drive toward greater adoption of LNG without assistance. However, many vessel owners and gas suppliers are reluctant to be the first to make the investments in LNG vessels and infrastructure regardless of the advantages. The EU has determined that these measures are necessary in order to reduce perceived risks, accelerate market decisions, and attain the stated goals for LNG deployment.

In contrast, the United States does not have a national policy to support LNG as a marine and transportation fuel. Instead, our LNG market is developing project-by-project, driven by first-adopters such as Harvey Gulf, Tote, Matson, and Crowley with no federal support or strategy; despite the tremendous benefits LNG offers to the country. While we have seen some movement in disparate locations, there is not so much as a policy statement that commits this country to the development of LNG as a transportation fuel; and there are certainly no programs to support the construction of vessels and infrastructure to make this possible nor to address regulatory uncertainties and enhance public acceptance of LNG.

The challenges and obstacles that exist here are no different from those in Europe, and LNG is new to everyone. It appears, however, that the EU has tackled this question in a more coherent, direct, and proactive way that is rapidly producing results. To be sure, there are major differences between the US and the EU in terms of governmental structures and processes. The EU can promulgate Europe-wide regulations and implement promotional programs, and has a history of doing so. Here, that role would be shared between Congress and the Executive Branch, and that is yet another challenge given the continuing dysfunction between both branches of government.

A policy declaring that LNG as a transportation fuel is in the national interest, and committing to the support, promotion and encouragement of its development would have several immediate effects:
  • It would be a clear signal to all potential stakeholders that LNG is “real” and has the backing of Congress and Administration;
  • It would put federal agencies on notice – and could require them– to collaborate with industry on practical and uniform regulation, reduced delays and greater certainty; and
  • It could include limited and temporary financial incentives such as loan guarantees or tax incentives to accelerate LNG conversion, because early adopters should be encouraged in order to build a sustaining market that benefits the entire country.

Federal resources are constrained, but without a national commitment, LNG may not gain the critical mass and momentum to create a long-term viable market. Regulatory direction is important, and does not involve direct costs, but if combined with properly structured and managed loan guarantees or tax incentives they would have a greater likelihood of jumpstarting this industry at low risk and large benefit to the whole nation in emissions reductions, energy independence, economic activity in shipyards and elsewhere. The promise of LNG is so great it deserves this sort of recognition, attention, and effort. Clearly the EU sees it that way, and we should as well and the risk if we don’t address it in this way is diminished potential for LNG to transform this country and the lost opportunity to lead the world in LNG development and utilization.

John Graykowski is the former Deputy and Acting Maritime Administrator and is now a Principal of Maritime Industry Consultants,, most recently working with marine operators on regulatory issues associated with use of LNG as a marine fuel.

Zim Ship Blocked from Entering Oakland Port

By Mark Edward Nero

A Zim Shipping vessel that was scheduled to unload at the Port of Oakland on Sept. 27 instead departed for Southern California after it was blocked by a group protesting in solidarity with Palestinians living in the Gaza Strip who are directly affected by a recent wave of violence in the region.

Protesters began picketing around 5 am to block the ship from unloading its cargo at Berth 57, but it was actually non-action by longshore workers that caused the Hong Kong-flagged Zim Shanghai cargo vessel to depart for another location.

According to the International Longshore & Warehouse Union, its members would not unload the vessel because of safety concerns. The protestors were said to have blocked ILWU Local 10 and Local 34 longshore workers from driving into the terminal during the workers’ shifts at the port’s SSA terminal.

“Longshoremen and clerks trying to report to work were threatened physically at some points of ingress and their personal vehicles were physically blocked,” a statement released by the ILWU about the incident said in part. “As such, all personnel stood-by outside of the demonstration perimeters for health and safety purposes.”

SSA released all personnel from work at about 8 pm, according to the union, while the Zim Shanghai set sail for the Port of Los Angeles.

The organizers of the protest, a group calling itself “Block the Boat,” has previously targeted vessels operated by Zim, which is Israel’s biggest cargo shipping company and is 32 percent owned by the country’s government.

In August, protesters kept the Zim Piraeus cargo ship from being unloaded for days at the Port of Oakland when longshore workers refused to cross picket lines. Despite its reluctance to tangle with the protestors, however, the union has insisted it is not collaborating with the resistance movement.

According to union communications director Craig Merrilees, the ILWU is not among the groups organizing the protests, and the leadership and membership of the ILWU have taken no position on the Israel/Gaza conflict.

Seattle Port, Corps of Engineers, Sign Harbor Deepening Deal

By Mark Edward Nero

On Sept. 29, the US Army Corps of Engineers and Port of Seattle signed an agreement that moves forward a $3 million cost-shared feasibility study to investigate potential port deepening alternatives.

“The Port of Seattle greatly appreciates the Corps of Engineers in starting this study,” port CEO Tay Yoshitani said. “This is another step in keeping the Pacific Northwest a competitive trade gateway, and keeping thousands of local jobs here.”

In March 2012, a preliminary Corps report found federal interest in potentially deepening Seattle Harbor’s East and West Waterways. The feasibility study, which was signed by Seattle District Commander Col. John Buck and Port of Seattle Chief Executive Officer Tay Yoshitani, is expected to determine if there’s an economically-justifiable alternative.

The Corps and port are to split the cost equally and the study should be complete in three years. When complete, the feasibility report is to include a net benefit analysis and the required National Environmental Policy Act documentation will disclose any environmental effects of deepening the existing channel.

Currently authorized waterway depths are between -34 and -51 feet mean lower low water; the study will investigate to depths of -55 feet MLLW, taking into consideration economics, cost, risk, environmental aspects, cultural resources, fish habitat, endangered species, geotechnical, coastal engineering and cost engineering.

POLB Exec: Chassis Shortage Solution Coming

By Mark Edward Nero

One of the serious ongoing issues for years at the ports of Los Angeles and Long Beach has been a shortage of chassis for drayage trucks as ocean carriers have stopped providing chassis, forcing the intermodal industry to utilize chassis pools and chassis leasing options.

But according to the head of one port, various stakeholders have begun working on a solution, or at least a better way of doing business.

More than 90 percent of the chassis are owned by three companies, all of whom are now talking together, Port of Long Beach head John Slangerup revealed Sept. 22 during the annual Intermodal Association of North America Expo.

“At our port it’s a very unusual situation where one terminal operator will have a surplus of chassis and another will be begging for them. It’s just not managed right,” Slangerup said. “The good news is that the three main players are working together to come up with a solution and we have been working with them on trying to align resources and align the process so we can actually come up with a workable solution.”

Slangerup declined to go into detail, but said that the talks themselves are a sign of progress.
“I’ve met with these folks and they are absolutely serious about integrating their management programs as a collaborative effort,” he said. “I think it’s going to happen very soon and I think it’s going to do a lot to alleviate congestion.”

“It’s not a perfect chassis fleet solution, but it’s the first great step. I think eventually we would all like to see an interchangeable chassis fleet (as a) solution, but what’s coming here soon is going to be a big step forward.”

Slangerup’s counterpart on the other side of the seaport complex, Port of Los Angeles CEO Gene Seroka, agreed that it’s going to take a collaborative effort to solve the problem.

“We have to have all stakeholders at the table,” he said.

Port of Hueneme Sets FY Shipping Record

By Mark Edward Nero

The Port of Hueneme realized the highest international trade year in its 77-year history and the second highest year for domestic and international freight combined, according to newly-compiled data by the Southern California port.

The total tonnage for FY 2013-2014 came in at a strong 1.43 million metric tons, representing a less than one percent decrease from the port’s all-time high during the previous fiscal year.

Strong growth in freight activity was seen in the port’s niche markets of automobiles, high and heavy cargos, fresh produce, fertilizer and domestic commodities.  The year included a 30-percent increase in auto exports – the second-best year on record while imports saw a 7.1 percent increase over last fiscal year.

Hueneme’s fiscal year runs from July 1 through June 30.

A large percentage of the export increase, the port says, was driven by more foreign manufacturers such as Honda, Toyota, Nissan, and Acura operating from new facilities within the United States and sending their US manufactured autos to the Asian market.  

Hyundai/Kia lead the import arena with a strong 10 percent growth, according to port data.

Other customers of the port include Yara North America, which manages the liquid bulk fertilizer through the port and across North America; and Wallenius Wilhelmsen Logistics, a shipper handling agricultural and heavy equipment cargo supplies.

“This year’s cargo performance sets a new milestone for the port,” port Director Kristin Decas said. “This achievement is driven by our customers and business development team.  We’re committed to continuing our partnerships and strategic planning to maximize the social and economic benefit the port brings to our community and industries.”

Thursday, September 25, 2014

Fire Shutters LA, LB Port Terminals

By Mark Edward Nero

Operations within marine terminals at both the Port of Los Angeles and Port of Long Beach were shuttered for the better part of a day earlier week after an enormous fire erupted at the Pasha Stevedoring terminal at the Port of LA’s Berth 177.

The flames broke out about 6:40 pm Sept. 22 beneath a steel warehouse, sparked by a torch-welding operation, according to authorities.

The blaze was contained to a 50-foot-by-800-foot area, and although the warehouse did not catch fire, the dock beneath it was burned. About 850 terminal employees were evacuated, but no injuries were reported as a result of the fire.

Meanwhile, at the neighboring Port of Long Beach, three terminals temporarily discontinued operations the morning of Sept. 23 due to smoke and fumes from the fire at the LA port. Through a mutual aid agreement, Long Beach Fire Department fireboats based in the Port of Long Beach assisted the Port of Los Angeles with fire suppression at Pasha.

Smoke from the fire led the Long Beach terminals closest to the Port of Los Angeles, Pier T, Pier A and Pier F, to close for the day shift. The blaze was fully extinguished by 2:30 pm. After reassessing the situation, the affected Long Beach terminals reopened for the night shift, which began at 6 pm. Terminals at the Port of LA reopened at 9 pm.

According to LA fire officials, the burned warehouse was not a total loss and could reopen at some point.

Tacoma Port CEO: Puget Sound Collaboration Vital

By Mark Edward Nero

Port of Tacoma CEO John Wolfe said this week that cooperation between the seaports in Seattle and Tacoma in the future will be vital to the continued success of maritime industry in Puget Sound.

“When our customers look at the Puget Sound gateway, they look at it as a single gateway, and yet we’ve been competing, sometimes in healthy ways, sometimes arguably in unhealthy ways, with our friends at the Port of Seattle,” Wolfe said. “We need to step up beyond that. It doesn’t serve our customers very well when we’re driving down rates and service. It’s not a sustainable model.”

His comments came Sept. 22 during the 2014 Intermodal Association of North America Expo, which took place this week in Long Beach, California. Wolfe was referring to ongoing talks between Seattle and Tacoma on sharing agreements.

In January 2014, the Seattle and Tacoma ports, which sit 30 miles apart, reached an agreement to share information about operations, facilities and rates in order to help Puget Sound better compete in the global maritime industry.

“I’m not at liberty to share all of the details yet; I would say that we’re making progress in terms of some unique collaborative efforts that we are hopefully going to be able to share with the public in the very near term, and I think will be beneficial to those who choose to do business within our gateway,” Wolfe said this week.

He also hinted that the process hasn’t been particularly smooth or easy.

“It certainly is challenging when you have parochial views that have lasted for many years,” he said. “But there is motivation at both ports, within the leadership there, to get something done.”