Thursday, August 19, 2010

West Coast Initiative Named Potential Grantee sor Marine Highway Funds

United States Transportation Secretary Roy LaHood announced last week that the initial projects eligible for funding under the Marine Highway Program will include the Golden State Marine Highway Initiative for the state of California.

In all, LaHood named eight projects and six initiatives nationwide as eligible for funding under the program.

The project and initiative operators will now have to vie for the $7 million in federal Marine Highway Program funds available. Grant requests must be submitted by Aug. 27.

Of the 35 total port and transportation agency applicants, the Golden State initiative was the only West Coast proposal to be selected as a potential grantee.

The Golden State Initiative will provide funding to the ports of Redwood City, Hueneme and San Diego and the Humboldt Bay Harbor District for the development of a 1,100-mile Marine Highway along the West Coast of California. The project may ultimately extend further north, possibly into the Pacific Northwest.

The federal Marine Highway Program, launched in April, seeks to support routes where water transportation presents an opportunity to offer relief to landside corridors that suffer from traffic congestion, excessive air emissions or other environmental concerns and other challenges. Projects eligible for funding are new waterborne services or expansion of current services between US ports.

Fully implemented, the Golden State Marine Highway Initiative could provide an alternative to domestic north-south freight traffic along the highly congested Interstate-5 in California. This could provide some relief to considerable annual truck delays in several urban areas of California and relieve some of Southern California’s freight rail congestion identified by the US Department of Transportation.

Foss to Retrofit Second Tug With Hybrid Power System

The Seattle, Washington-based Foss Maritime Company, builder and operator of the world's first hybrid-powered tugboat, plans to add a sister hybrid tug to its Southern California fleet.

Foss plans to retrofit the Campbell Foss, a conventional dolphin-class tug currently serving San Pedro Bay, with a Foss/Aspin Kemp & Associates hybrid power system.

The vessel will be retrofit with motor generators, batteries, and control systems at Foss’ shipyard in Rainier, Oregon.

The Campbell Foss will be the sister ship to the Carolyn Dorothy, the first tug to feature a hybrid system. The Carolyn Dorothy was put into service at the Port of Long Beach in 2009.

The retrofit of the Campbell Foss will be carried out through a partnership between Foss, the Port of Long Beach and the Port of Los Angeles. The project will be funded by a $1 million California Air Resources Board grant previously awarded to the Port of Long Beach.

"The Foss /Aspin Kemp & Associates hybrid technology is already proving its worth on the Carolyn Dorothy," said Richard Cameron, Director of Environmental Planning at the Port of Long Beach. “When the Air Resources Board asked for proposals to retrofit existing vessels with cutting-edge hybrid technology, we knew we wanted to partner with Foss again. We believe the retrofit will be the next step in hybrid technology evolution.”

The goal of the retrofit project is to achieve significant reductions in pollution emissions while enhancing the Campbell Foss's fuel efficiency and operational capabilities.

Projected annual emissions reductions per year include:
  • More than 1.7 tons of diesel particulate matter
  • More than 53 tons of oxides of nitrogen
  • More than 1.2 tons of reactive organic gases
  • More than 1,340 tons of carbon dioxide
The hybrid system retrofit is also expected to save Foss more than 100,000 gallons of diesel fuel each year.

Susan Hayman, Foss Maritime’s Vice President of Environmental and Governmental Affairs, said Foss has been looking forward to an opportunity to retrofit one of its existing tugs to work alongside the Carolyn Dorothy and plans to introduce more hybrid tugs in the years to come.

“At Foss, we have a 'zero trace’ corporate goal and a commitment to give our customers the highest level of service,” Hayman said. “Making use of cost-effective hybrid technology is an important part of our strategy as it allows us to use best-in-class, advanced technology to serve our customers and manage our expenses over the long term while safeguarding the environment at the same time. We have an unprecedented opportunity to transition harbor tugs around the world to vessels that deliver cleaner air and greater fuel efficiency.

Seattle, Tacoma Ports Continue Moving in Opposite Volume Directions

The Puget Sound ports of Seattle and Tacoma continued moving in opposite directions in July, with Seattle container volumes exploding and Tacoma remaining in the negative column.

The Port of Seattle reported total container volume for July of 219, 349 TEUS, a 61.7 percent increase compared to July 2009.

The port also handled 102,126 loaded inbound containers, a 63.8 percent increase over the year ago period. In addition, the port handled 84,366 loaded outbound TEUs, a massive 89.3 percent increase over the same period last year.

Meanwhile, at the Port of Tacoma, volume numbers continue to remain almost universally negative.

Tacoma officials report that 117,749 TEUs were handled in the month of July, a 3.7 percent decrease over July 2009.

The port handled 40,193 loaded inbound TEUs, a 9 percent increase over the year-ago period, and 21,786 loaded outbound TEUs, a 35.1 percent decline over July last year.
Tacoma has not seen a monthly increase in total container volume since June 2008.

Oakland Port's July Container Volumes Increase

The Port of Oakland, reflecting the general upward trend of other California ports since January, turned in its sixth straight month of total container volume increases in July.

Oakland officials report that the port handled 214,643 total containers for the month of Jul, a 16.3 percent increase over July 2009.

During July the port handled 75,601 loaded inbound containers, a 16.4 percent increase over the year-ago period.

Despite the total volume and loaded inbound increases, the port saw a 6.8 percent decline in total loaded outbound containers during July, with 78,954 TEUs moved, a 6.8 percent decrease over the same period last year.

Oakland, the state's third busiest container port, remains on track to finish in the positive for the entire year. The port has reported a 13.5 percent increase in total container volume for the first seven months of the year compared to the January to July period in 2009.

Tuesday, August 17, 2010

Oil Deal Could Cut Long Beach Port Profits

This article by PMM Online editor Keith Higginbotham originally appeared on

A Long Beach City Council and Mayor-backed contract with a major oil company that is at the heart of a November ballot proposition seeking to change the City Charter may have undercut potential Port of Long Beach oil profits by as much as $150 million over the next ten years, despite repeated objections raised by state and port officials.

While the contract will boost revenues to the nearly bankrupt Long Beach City Hall-managed Tidelands Fund, the $15 million a year loss to the port, which averages about $120 million a year in profits, could hamper future port development projects, expose the port to additional debt, and threaten the port's business competitiveness at a time when port industry competition is growing rapidly.

According to supporters, Proposition D is tacitly about minor changes to the relationship between City Hall and the city's Harbor Department, which manages the port.

However, Prop D, and the oil contract behind it, will also shift a great deal of cash from what is one of the leading economic and job creating engines in the Long Beach region to the control of the fiscally-challenged City Hall.

Through Prop D, Mayor Bob Foster and the Long Beach City Council are asking voters to approve two changes to the City Charter: a change to the formula used to calculate how much port profit the city can annually request; and, a change removing control over port-area oil properties from the port's Board of Harbor Commissioners and turning this authority over the City Council. 

The first part stipulates that the annual transfer of port profits be based on 5 percent of the port's gross earnings. Currently, the port transfer is based on 10 percent of the port's annual profits. The Charter amendment, if approved, will increase the port's annual transfer to the city by several million dollars a year, depending on port revenues.

However, at the heart of the second portion of Prop D is a contract with Occidental Petroleum Co. (Oxy) that was approved in November 2009 by the City Council.

The impetus for this new contract was a 2006 proposal from Oxy to invest in new oil production in the harbor tidelands area in exchange for a share in the profits of any new oil production generated. The profit incentive, the argument goes, would justify additional production investment, which in turn would increase oil production and the amount of oil profits going to the city.

"Without ongoing capital infusion, the oil production will decline and [the city] may not be able to withstand the next downturn in oil prices," Long Beach Oil and Gas Department's manager of oil operations Curtis Henderson explained to port officials in an April 2009 e-mail.

These tidelands oil operations are split into two distinct areas – the West Wilmington Field, which basically encompasses the port area and land north of the port, and the Long Beach Unit, which encompasses the four oil islands in Long Beach Harbor.

The Tidelands Oil Production Company, or TOPKO, is the city's oil production contractor for the West Wilmington Field and THUMS is the contractor for the oil islands. Oxy owns both – the firm purchased TOPKO in 2006 and THUMS in 2000.

Due to geologic fault lines running north and south, the oil reserves beneath the West Wilmington Field sit in roughly five isolated regions. Ownership of each of these "fault blocks" is split in differing proportions between the state, the city, the port and various others.

According to an internal port document detailing the ownership of the oil rights in these five regions, the state owns a total of 61 percent, the port owns 31 percent, the city owns 7 percent and various unidentified others own 1 percent.

However, the split of profits from the roughly 450 active wells in the West Wilmington Field are dictated by two contracts – one between Oxy and the state, and one between Oxy and the city (which includes the port's interests).

Under the current contract between the state and Oxy, the state receives 95 percent of the oil profits from state-owned reserves and Oxy receives 5 percent. 

Under the previous city contract with Oxy, the port received about 95 percent of the profits from existing oil production in city-owned reserves while the city received about 5 percent – Oxy received an administrative fee but no net profits from the city portion of the West Wilmington Field.

Under the terms of the new contract between Oxy and the city, which took effect Jan. 1, 2010, profits from any new production will be now be split between City Hall and Oxy, with no money going to the port. The city will receive 51-percent of these new profits while Oxy will receive 49-percent. Most of these new profits for the city will go to the City Hall-managed Tidelands Fund, with a small portion going to the General Fund.

Due to this delineation between existing and future oil production, it was critical while formulating the terms of the new Oxy contract to determine exactly what the future production of existing wells was. Oxy proposed using an estimate of what is called the base production amount. This base amount is a mathematically derived production level for any given point in time.

For example, if this calculated base amount was 1,000 barrels of oil for the month of July, 2015, this amount is all that is covered under the old contract terms. Even if all the wells were drilled 50 years ago, any oil produced over the base amount of 1,000 barrels would be considered new production and covered under the revenue split of the new contract.

In 2007, the State Lands Commission (SLC), the Long Beach Department of Oil and Gas (LBGO), and Oxy formed a technical team to work on developing a base production estimate for the West Wilmington Field.

While the state participated in the technical team's effort, the SLC participants grew dissatisfied over the eight-month long effort. In an October 2009 letter to LBGO's Henderson, a senior SLC official explained, "the SLC did not fully agree with the methodology used by the [technical team] to forecast future production from the West Wilmington Field."

After the technical team released its findings, the SLC decided to develop a separate estimate in conjunction with the port, which was looking to develop its own estimate.

In an April 2009 e-mail from port Chief Financial Officer Sam Joumblat to LBGO's Henderson, Joumblat explained why the port sought its own base production estimate.
"It is [the port's] fiduciary responsibility to get an independent appraisal of our asset before we sell to Oxy," wrote Joumblat.

Through their various consultants, the SLC and the port eventually came up with their own joint estimate, while Oxy and LBGO supported the technical team estimate.

The difference between the two estimates, each based on differing methodology, was substantial. According to internal port documents obtained, the Oxy-supported estimate was 62-percent lower than the SLC/port estimate.

If the SLC/port estimate was correct, then over the next decade each existing well would produce vastly more oil than predicted by Oxy and LBGO. But in this scenario, the base amount in the new contract would be 62-percent lower than actual production and a tremendous amount of oil from existing wells would be covered by the terms of the new contract. This would greatly increase profits for City Hall and Oxy and conversely reduce what the port might have earned.

"Since Oxy is proposing to split profits over the existing reserves, then the lower the existing reserve (the base amount), the higher the amount they will split," wrote the port's Joumblat in a March 2009 e-mail to port senior executives.
LBGO had another reason to support the Oxy estimate and discredit the SLC/port methodology – namely, taxes.

In an April 2009 e-mail to port officials, LBGO's Curtis Henderson wrote, "The combined tax bill for this year is approximately $18 million. Any agreement offering a different methodology (from that of the technical team) would be subject to review by the county tax assessor and it would increase [the city's] total bill by at least $10 million."

Despite repeated SLC and port objections about the Oxy-supported estimate, City Hall eventually accepted the much lower base amount. The City Council approved the new Oxy contract for future oil production in November, 2009. It utilized the 62-percent lower base amount estimate supported by Oxy and LBGO.

Internal port documents show that port officials initially estimated the lower base amount would result in shifting as much as $150 million in potential port profits over ten years to the city. Based on the average annual port oil profits over the past ten years – about $13.1 million a year – the amount potentially going to the city under the lower base estimate over ten years would likely be closer to $81 million.

The SLC, which is negotiating a separate contract with Oxy for the state portions of the West Wilmington Field, has yet to agree to the same terms as the city – in part due to disagreements with Oxy over the base amount and in part due to disagreements over the profits-sharing split.

Under the terms of the city contract with Oxy, if the SLC manages to strike a better deal with Oxy, the terms of the state contract will apply to the city contract.

Evergreen, NOL 2Q Profits Jump

Taiwan-based shipping giant Evergreen Marine has reported its first quarterly profit in nearly two years, leading the firm's stock to climb to it highest point since June, 2008.

The shipping line reported second quarter net profit of $129 million, compared to a loss of $62 million in second quarter 2009. The second quarter profits easily beat Wall Street estimates of $72 million.

Peter Tzeng, a Taipei-based analyst at Polaris Securities Co., told Bloomberg News, “It’s too good to be true, but it’s true. Demand for container shipping has returned to the levels before the global financial crisis.”

During Monday trading on the Taiwan Stock Exchange, Evergreen's stock jumped more than 2 percent on the news, climbing to its highest point since June 10, 2008.

As part of a 100-vessel plan, Evergreen Group, the parent of Evergreen Marine, ordered 10 new vessels last month.

Singapore-based Neptune Orient Lines, the parent of APL, also reported an earnings turnaround due to rising cargo volumes and higher freight rates.

NOL reported second quarter profit of $100 million, up from a $146.7 million loss in the second quarter of 2009.

The line also announced it had completed orders for two new 10,700-TEU vessels as part of a 12-vessel order with Daewoo Shipbuilding & Marine Engineering.

SoCal Ports Continue Box Volume Climb In July

The Southern California ports both reported more than 25 percent cargo volume growth during the month of July, continuing an upward trend that began in the first part of the year.

The Port of Long Beach handled a total of 587,881 TEUs in July, a 35.8 percent increase over the same month in 2009. The port also reported handling 293,878 TEUs of loaded inbound traffic, a 32.5 percent increase over the year ago period. Total loaded outbound volume during July was 126,177 TEUs, a 16.4 percent increase over July 2009.

Across San Pedro Harbor, the Port of Los Angeles moved a total of 730,745 TEUs in July, a 26.8 percent increase over the year-ago period. Port officials also reported total loaded inbound box volume climbed 21 percent for the month to 369,388 TEUs and total loaded outbound box moves were 146,368 TEUs, a 5.9 percent increase over July 2009.

Fast Ferries

By Chris Philips, Managing Editor

Alaska is not for the faint-hearted. Everyday life has unusual challenges, from 20 hours a day of darkness in the winter, to flocks of mosquitoes in the summer and crazy hormonal bull moose in the fall. Alaskans exposed to these challenges seem to thrive on the extraordinary, which explains the participants in the Iditarod and the Bering Sea Opilio crab fishery.

Another extraordinary Alaskan is the recently launched, 95-foot by 60-foot ferry M/V Susitna, for Alaska’s Matanuska-Susitna borough on Cook Inlet.

“We’re pretty proud of her,” says Doug Ward, director of shipyard development for Alaska Ship and Drydock (ASD), in Ketchikan, Alaska. “She’s an extremely unique ship.”

Built by ASD to a design by Seattle Naval Architecture firm Guido Perla and Associates, with guidance by the US Navy’s Office of Naval Research (ONR), the unusual ferry will connect Anchorage to Port MacKenzie in the Mat-Su Borough on a 3-mile route that will turn a 2½-hour drive into a 15-minute boat trip. The borough, known as Mat-Su, will own and operate the passenger-vehicle ferry and give the Navy data on its operation as a possible ship-to-shore transport vessel.

Susitna is powered by four MTU 12V 4000 diesel engines, driving four specially designed waterjets as well as two azimuthing thrusters. The ro/pax vessel has a capacity of 100 passengers and 20 vehicles.

What makes the Susitna so unique is its dual-purpose hull, which combines the speed and seakeeping capabilities of a SWATH (Small Waterplane Twin-Hull) vessel with the versatility of a landing craft. Where a conventional catamaran has a main deck, Susitna’s is missing. Instead the craft has two demi-hulls with fore and aft crossmembers, and an empty space where the deck should be. “It’s like a big open donut,” says Ward. The hole is filled with a cargo deck that can be raised or lowered to fit the needs of the boat. Raised, the cargo deck is out of the water, the demi-hulls submerge to their 12-foot design depth and the vessel operates like a SWATH- in other words, with the seakeeping capabilities of a much larger vessel. The buoyancy of the hulls remains under the water’s surface, offering a surprisingly smooth ride. In SWATH mode the vessel has a 12-foot draft.

Stop the ferry and lower the cargo deck – an operation accomplished via a carefully calibrated hydraulic system – and the draft is reduced to 4 feet. In this mode, the vessel can be driven up on the beach with her hull-mounted waterjets and cargo can be offloaded via a ramp like a conventional landing craft.

The Navy has invested more than $1 million in the integrated science package, which includes sensors to monitor the stresses and strains on the hull.

During the builder’s trials, which begin this month, the vessel is expected to reach 20 knots and produce a service speed of 17 knots.

Ward says that in spite of the fact the vessel is a testbed for the Navy, the Susitna was designed to be a ferry. Terminals on each side of the ferry’s route will allow her to stay in deep-draft mode, using her sharpened demi-hulls to full advantage. Because Cook Inlet freezes in the winter, the ferry also has ice cutting capability.

“The lower hull leading edge is 2-inch-thick high strength steel,” says Ward. The builder calls the concept an “ice knife.”

“The rounded bow goes under first tier sea ice up to two feet thick,” he says. The leading edge of the hull then lifts the ice and cuts it. “As far as we know the Susitna is the first ice strengthened twin hull vessel.”

One of the biggest challenges for the shipyard was the diverse material that went into the hulls of the boat. For example, the bottom of the demi-hulls is reinforced, and has five different grades of steel in seven different thicknesses. While the demi-hulls are steel, the cargo deck is aluminum, and was built by Latitude Marine Services in La Conner, Washington, along with the passenger compartments. Alaska Ship & Drydock, Inc. built the aluminum pilothouse.

Alaska Ship and Drydock is an independent corporation owned by the Alaska Industrial Development and Export Authority and supported by the local borough and city. Susitna is the yard’s third newbuild, following a 120-foot ro/ro ferry, Oral Freeman, built in 2001, and the Chevron Legacy, a floating fuel dock and grocery store built for the 2010 winter Olympics in Vancouver, BC.

Low Emissions
In the lower 48, Kvichak Marine Industries and Nichols Brothers Boat Builders have delivered M/V Taurus, their fourth high-speed, environmentally friendly ferry to the Water Emergency Transportation Authority (WETA) located in San Francisco.

WETA has mandated that their new passenger ferries integrate as much green technology as possible and that emissions be 85 percent cleaner than the current EPA emission standards for Tier II (2007) marine engines. They started with a sleek, low wake 118-foot catamaran hull, designed by Incat Crowther of Australia, to minimize shore erosion from wake and reduce fuel consumption.

The vessels are powered by a pair of Tier II-compliant, MTU 16V2000, 1,410 HP Diesel engines with Selective Catalytic Reduction (SCR) systems from Engine, Fuel & Emissions Engineering of California. SCR injects urea into the exhaust before it passes through a precious-metal catalyst, converting nitrogen oxide into harmless nitrogen and water.

In addition to minimal shore impact and low emissions, the passenger ferries showcase several additional green features, including custom exhaust systems minimize noise pollution on ship and shore, solar panels to augment the electrical system and a sonar system that allows the captain to detect and avoid whales and debris.

Taurus is the final boat of the four-boat contract.

On Whidbey Island, Washington, Ice Floe, LLC, (dba Nichols Brothers Boat Builders) recently completed a repower of the M/V Del Norte, for Golden Gate Ferries. Four new Tier 2-compliant MTU 12V4000M60 series engines and new main driveline components were installed, while the four MJP waterjets were rebuilt by Seattle-based Sound Propeller.

Following the refurbishment of the Del Norte, Nichols Bros. will address the refurbishment of two ferries purchased by Golden Gate from the State of Washington. Golden Gate Ferries purchased the two boats, originally built at Dakota Creek Industries in the late 1990s as the M/V Chinook and M/V Snohomish, in January 2009. The engines to be installed in the two boats will have emissions that are 20 percent cleaner than the required Tier 2 marine engines. Additionally, Golden Gate Ferries, in partnership with MTU/Detroit Diesel, will be conducting a bio-diesel pilot project with the two boats.

In addition to new propulsion systems, the interiors and exteriors of the vessels will be fully refurbished to like-new condition.

The Chinook will be completed first, and work on the M/V Napa (ex- Snohomish) will begin when work on the first vessel is complete. The work is expected to take approximately six months per vessel and a little more than a year in total.

Fifth Ferry Boat for USS Arizona Memorial
The US Navy accepted delivery of the fifth USS Arizona Memorial passenger ferry boat from Modutech Marine Inc. of Tacoma, Washington in late June. This vessel is one of six boats being procured to replace the existing ferries that have reached the end of their service life. The boats, procured for the National Park Service by the US Navy’s Program Executive Office (PEO) Ships, serve as a ferry service to shuttle visitors to and from the memorial, and continue to support the US Navy’s commitment to the National Park Service, as they tell the compelling stories of the Dec. 7, 1941, attack on Pearl Harbor.

The new 78-foot vessels are constructed of fiberglass and can accommodate up to 149 passengers and three crew members. The boats use a combination of clean fuel technology propulsion systems, including EPA Tier 2 compliant marine diesel engines, exhaust and fuel system treatments, and biodiesel fuel. This will significantly reduce the “carbon footprint” of the passenger service provided at the national memorial. The ferries also comply with applicable Federal Passenger Vessel Accessibility Guidelines, improving accessibility.

Golden Gate Ferries 40-Year Mark
Sunday, August 15th marks the 40th Anniversary of the Golden Gate Ferries. The service was inaugurated by the Golden Gate Bridge, Highway and Transportation District, which purchased the twin-engine, diesel-powered ferry M/V Point Loma, reconditioned and rechristened her the M/V Golden Gate and began service on August 15th, 1970.

Between 1972 and 1977, the District built three new gas turbine-powered aluminum ferries, each capable of carrying 715 passengers, designed by renowned Seattle Naval architects Philip F. Spaulding and Associates. The new boats were built by San Diego-based Campbell Industries, with the first of the series, the G/T Marin, beginning service between Larkspur and San Francisco on December 11, 1976.

Former PMM California editor, Wes Starratt, says Kaiser Aluminum provided the aluminum and developed the aluminum welding techniques that made the fast aluminum ferries possible.

In June of 2007, Bay Ship & Yacht completed a $6.5 million refitting of the Marin, including a complete remodeling of the boat. Structural modifications were required for new passenger seating, along with new interior bulkhead linings, carpet, and vinyl flooring, as well as overhead ceilings, ventilation, lighting, and exterior windows, plus new fresh water and sanitary systems, new generators and electrical systems, and a complete repainting of the vessel. New safety features included new fire boundary bulkheads on both decks, and new fire doors.