No Further Retrofit Funds for Bay Area Truckers

Air quality officials in the Bay Area have sent out "so, sorry" letters to nearly 1,000 independent truck drivers that serve the Port of Oakland. Many of the drivers were notified last week in the Bay Area Air Quality Management District letters that the drivers would not be eligible for grants to upgrade their trucks to meet state air regulations that essentially ban the drivers– nearly a third of the nearly 3,000-vehicle fleet– from operating in the port as of Jan. 1, 2010.

The main reason for the rejection letters is that the $22 million fund on which the BAAQMD was drawing to provide the upgrades is depleted.

The fund was being used to help drivers of 1994 to 2003 model year trucks to pay for diesel smokestack filters– each costing from $10,000 to $21,000. Drivers receiving the grants were only responsible for the sales tax on the retrofit filters.

The fund was also used by the air district to provide $50,000 grants toward the purchase of a new truck, with the remaining $50,000-plus price tag for a new truck being borne by the drivers.

BAAQMD began accepting applications for the filter grants last year and stopped accepting applications Sept. 10 of this year. In reality, though, more than two-thirds of the grant applications were submitted last year and those still available this year were offered on a first-come, first-serve basis. To date more than 815 applications for retrofits have been approved while another 880 rejection letters have been sent out.

Another 190 new trucks have been tentatively approved for a $50,000 full vehicle grant, with more than 180 such applicants rejected.

The BAAQMD said additional funds are not likely to be found to continue the grant program.

Port of Oakland officials have also stated that the original fund was never anticipated to cover all the drivers. Based on current container traffic, officials estimate that the port only needs between 1,000 and 1,300 trucks to adequately service port terminals.

Washington State Ports: Election Results

Voters in the Seattle area have overwhelmingly re-elected John Creighton to the Port of Seattle governing board. Two new members to the port commission, Rob Holland and Tom Albro, were also elected in Tuesday's election. Though Creighton ran unopposed and garnered 98 percent of the vote, Holland and Albro both faced tough opponents. Holland beat out opponent David Doud by a 55 percent to 45 percent spread. Albro defeated opponent Max Vekich 57 percent to 43 percent.

In Tacoma, three seats on the port commission were up for grabs.

Incumbent Dick Marzano, running for his fifth term on the commission, posted a 61 percent to 38 percent victory over opponent Charles Kelly Creso. Connie Bacon, also an incumbent seeking her fourth term as a port commissioner, defeated rival Bill Casper 67 percent to 43 percent.

Newcomer Don Meyer, running for his first seat on the port commission, actually posted the strongest win of the night in the Tacoma races, defeating opponent Cathy Pearsall-Stipek 67 percent to 33 percent.

In Bellingham, political newcomer Mike McAuley stunned poll watchers by defeating 16-year member of the Bellingham port commission Doug Smith in a close 55 percent to 45 percent race. Voters also narrowly returned 18-year commission veteran Scott Walker to the board.

Walker defeated opponent John Blethen 52 percent to 48 percent.

Voters in Clark County elected unopposed candidate Nancy Baker to the Port of Vancouver USA commission, with 97 percent of the vote.

Buffett to buy BNSF

On Tuesday, Warren Buffet agreed to buy the 131-year-old United States Class I railroad Burlington Northern Santa Fe, the second largest freight railroad in the nation and one of the major rail players in the West and Mid West.

Buffett's Berkshire Hathaway conglomerate, which already owns 22.6 percent of the railroad, will pay $26 billion for the remaining 77.4 percent, paying $100 a share in cash and stock. Stock in the Fort Worth, Texas-based BNSF shot up 28 percent to $97 a share on the news.

Well known for sage investing that has made him a billionaire many times over, Buffett admitted to the New York Times on Wednesday that even this deal was pushing his financial limits.

"I stretched on this one," he told the Times. "I went to the last nickel."

To finance it, Buffett, often the man who sets the rules for other investors, will break one of his cardinal own: not to split Berkshire stock. To pay BNSF stockholders in the deal, Buffett will split Berkshire's class B shares 50-for-1. Berkshire will also borrow $8 billion in addition to using $8 billion of its own for the cash portion of the deal, with plans to pay off the debt in three annual payments.

Buffett first bought into BNSF in 2006 and also owns stock in Union Pacific and Norfolk Southern. Long a proponent of knowing any industry before investing, analysts at the time of the first small rail purchases believed that Buffett was in essence wading into the market with the intention of jumping in the deep end at some point. Eventually he amassed more than 76 million shares of BNSF before announcing the full plunge Tuesday.

Buffett predicted that though BNSF, like many in the transportation industry, have experienced a downturn due to the global economy, things would eventually pick up.

“We’ll make a good return, not a great return,” he told the Times.

Shipyard Misuse Sparks Ire of Guam Legislator

Guam territorial Sen. Jim Espaldon had demanded an immediate answer to why Port Authority of Guam officials allowed a barge to load commercial cargo– against state law– at the non-PAG-controlled Guam Shipyard.

In a letter to PAG general manager Leon Guerrero, Empaldon– one of 15 locally elected senators that make up the territorial legislature– made no secret of his displeasure at the situation.

"Now that a precedent has been set, what steps [is] the Port taking to stop the Guam Shipyard from again loading commercial cargo and functioning as an alternative port?" wrote Espaldon.

Guam law prohibits the use of any island facility other than those operated by the PAG for commercial purposes.

Empaldon also asked for confirmation on the amount of revenue the PAG lost, citing "sources" that told him it was more than $250,000.

The senator raised the specter of cuts to the $200 million remodernization program that the PAG is in the midst of, saying such investment should not be needed if the shipyard is actually competing with the port.

"We can downscale and not have to take out loans," wrote Espaldon. "Why are we being asked to raise tariffs, when we are turning away income?"

Port officials reiterated earlier promises to investigate and answer all questions about the situation.

West Coast Export Rate Increases Announced

Fast on the heels of gloomy third quarter earnings reports throughout the shipping industry, which laid the blame in no small part at the feet of "unsustainably" low rate levels, the Westbound Transpacific Stabilization Agreement has announced another round of rate hikes for US exports to Asia.

WTSA, an industry discussion group of 10 transpac carriers, is recommending that as of Dec. 1 member lines should raise dry container rates moving through the ports of Long Beach ad Los Angeles by $80 per 20-foot container, or TEU, and $100 per 40-foot container, or FEU.

WTSA also suggested members increase dry cargo shipment rates through other West Coast ports by $120 per TEU and $150 per FEU.

Starting Jan. 15, 2010, WTSA is calling for a general rate increase of $200 per refrigerated TEU and $250 per refrigerated FEU. Rates for refrigerated cargo moving intermodally via rail or through East Coast and Gulf ports were recommended by the WTSA to increase $400 per TEU and $350 per FEU.

Punta Colonet Revival Spurs Yuma

Revived activity in the on-again, off-again plans to construct a new container port at Punta Colonet on the Mexican West Coast have also kick started old dreams of a possible multimodal logistics center near the intersection of the California, Arizona and Mexico borders.

Mexican authorities this week are expected to close a new round of bids on the Punta Colonet port, envisioned by the Mexican government to lure Asian cargo away from Southern California ports where it will be shipped via rail to the US heartland.

The logistics center plan, first proposed in 2006, hopes to have Yuma, Arizona chosen as the location where rail service from the Punta Colonet port merges with United States mainline tracks. The study also looks at the viability of such a facility even if the Punta Colonet port is not built, mainly to service the Southwest as a distribution center for cargo coming from Southern California.

A preliminary draft study of the proposed rail warehouse and redistribution facility was presented to local stakeholders in Yuma last week.

While the downturn in the national economy put off further development of the plan back in 2006, the study was not abandoned, but rather shelved in the hopes that an economic turnaround could one day boost the project.

The study was undertaken by the Arizona Department of Transportation Multimodal Planning Division and the CanaMex Task Force.

All the parties involved in the study admit it would still be many years, and require a turnaround in the economy, before the Yuma facility could be undertaken.

NOL and COSCO 3Qs Down, CMA-CGM's CEO Denies Ouster Report

In ocean carrier news, Singapore-based Neptune Orient Line and Tianjin, China-based China COSCO posted losing third-quarters last week while the CEO of French carrier CMA-CGM denied press reports that creditors were demanding his ouster.

NOL posted a 29 percent drop in average container rates in the third-quarter compared to the year-ago period and predicted "significant losses" through at least the first half of 2010. In posting its fourth quarterly loss in a row, NOL reported a net loss in the third-quarter of $138.9 million compared to a $35 million profit in the year-ago period.

China COSCO posted a $101 million third quarter net loss compared to a $814 million profit from the same period in 2008.

Both COSCO and NOL reported container volumes dipped about 6 percent during the third quarter compared to the year-ago period.

In Europe, CMA-CGM founding CEO Jacques Saadé denied media reports that creditors want him gone before they will move forward with restructuring the privately-held carrier's $5.6 billion in debt.

“I can’t imagine that any of our financial partners would try to take advantage of this period,” Saadé told Bloomberg, adding that CMA-CGM expects to move into the black “in coming months.”

Guam Port Considering Options Over Shipyard Misuse

Port Authority of Guam officials are investigating how to proceed after revelations Saturday that a construction company used the Guam Shipyard to unload construction goods.

Guam law prohibits the use of any island facility other than those operated by the Port Authority of Guam for commercial purposes.

Port authority officials were discussing a course of action with their legal counsel, but declined further comment.

"We have information regarding this incident, and we are currently looking into this matter," port authority general manager Leon Gurrero told the Pacific Daily News.

Officials at the Guam Shipyard referred questions about the issue to construction firm Watts Construction. The construction firm could not be reached for comment.

Mass Port's Leone Named Chair of AAPA

The American Association of Port Authorities have appointed Michael A. Leone, port director of the Massachusetts Port Authority, as the 2009-2010 chair of the industry group's board. The AAPA represents over 150 port authorities in the Western Hemisphere.

Leone's formal installation occurred last week at the AAPA's 98th Annual Convention in Galveston, Texas. He succeeds 2008-2009 chair Geraldine Knatz, executive director of the Port of Los Angeles.

The new appointment distinguishes Leone as the first person to ever serve twice as chair of the AAPA board. He first held the chair position during the 2003-2004 term.

Named port director of the MPA in 1998, Leone previously served the MPA as legal counsel.

Prior to that, Leone served 22 years in the United States Coast Guard as both a legal counsel and military judge.

During his tenure at the AAPA, Leone will also serve as chair of the AAPA's U.S. delegation.

November 2009 Fidley Watch: Setting Examples

An earthquake near Samoa and subsequent tsunami in late September killed hundreds of people and displaced thousands. Two weeks later, fifteen shipping containers packed with dry foods, medicine, blankets and other essentials were loaded onto a ship at the Port of Long Beach, bound for victims in tsunami-stricken Samoa Islands.

According to the Port of Long Beach, the effort was led by International Longshore & Warehouse Union (ILWU) Local 13 members and supported with in-kind donations from the Port of Long Beach, terminal operator International Transportation Service (ITS), and shipping lines Hamburg Sud and Polynesia Line. Union members donated their time to load the containers and the Port and its customers waived related fees. Our hat is off to Local 13 and their service in Samoa’s time of need. Their actions serve as a good example for other groups during these difficult economic times.

A different type of example is being set on the East Coast, where many are wondering why New York’s Local 333 decided the current economic climate (September unemployment hovering at 9.8 percent) was a good time to call a strike against a small, two-tug, family-run company. Kosnac Floating Derrick and Local 333 had been engaged in good faith bargaining since their contract ran out last April, but the issue of 24-hour manning of tugs pushing unmanned aggregate barges remained unresolved. The company wanted to drop one deckhand and allow the engineer to pick up some of his load, while the Local believed this practice was inherently unsafe due to the long hours and the dangers involved in barge work. Local 333 president William Harrigan says, “You can’t do it with two deckhands– it’s suicide.”

Company president Veronica Kosnac Raffone says it needs a level playing field to remain profitable. She notes that Kosnac manned its tugs with larger crews than required by Coast Guard regulations and was losing business to competitors operating with four-man crews, whether they were non-union companies, unionized companies not abiding by the terms of their contracts, or unionized companies who already had union permission for four-man crews. She noted that, under the old contract, Kosnac was required to add a third deckhand after only six hours but local competitor Henry Marine Service, Inc was not required to add a third deckhand until the tug has been out for 15 hours, and K-Sea Transportation runs one of its tugs with four men while in New York harbor.

According to Union spokesman Steve Oravets, “The Coast Guard here in New York does not enforce the regulations on towing vessels.” He says the Coast Guard makes great use of its Public Relations Branch, ‘spinning’ their “failure to enforce.”

“I’m aware of the correspondence between Local 333 and the Coast Guard regarding manning on a variety of vessels,” says Commander Gregory Hitchen, Chief of Operations for Coast Guard Sector New York. Commander Hitchen believes there may be “…a difference of opinion with respect to requirements” and notes that his office has clarified federal manning requirements for Local 333. “We enforce the applicable federal regulations throughout the port of New York and New Jersey,” he says.

At press time in late October, Mrs. Raffone, her husband and her brother continue to operate Kosnac’s tugs with pick-up crews and three union members who have come back to work while the company’s other union members picket outside. She suggested that the Local would serve its members better by organizing other companies and enforcing existing contracts, instead of picking on a loyal union company.

In this fragile economic climate, few companies are hiring tug crews. Will Local 333 be able to find employment for the union crews that were working for Kosnac up until September? Perhaps the East Coast local can learn from the example set by the West Coast group: An injury to one is an injury to all.

-Hugh Ware contributed to this editorial.

Chris Philips, Managing Editor