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Friday, December 10, 2010

Industrial Stagnation

By Chris Philips,
Managing Editor, Pacific Maritime Magazine

The late 18th and early 19th century saw the dawn of the industrial revolution, whose impact was felt throughout the world and which catapulted the United States and its citizens to an unprecedented level of wealth, safety, health and comfort that we enjoy to this day.

In 1775, the New York firm of Sharpe and Curtenius cast the first cylinder for a steam engine in the new world. Twelve years later, John Fitch of Pennsylvania built a working steam-powered boat, operated by six pairs of mechanical oars. In 1790, his second steamboat reached seven miles per hour on the Delaware River. That summer, it operated a passenger service from Philadelphia to Burlington, Bristol, Bordentown and Trenton.

In 1804, Robert Stevens built a steamboat 68 feet long, with a 14-foot beam and a revolutionary, 100-tubed boiler. At the same time, Oliver Evans was in production of 50 high-pressure steam engines, as well as an amphibious steam-powered paddlewheel dredge that he drove under its own power from his workshop to the Schuylkill River.

In 1807, Robert Fulton’s steamboat North River, later known as the Clermont, made her maiden voyage from New York to Albany. The next year, Robert Stevens sailed from New York to Philadelphia (the first sea passage by steam power), and in 1811, the first steam-powered ferry, Juliana, began operation between New York and Hoboken, New Jersey.

By 1814, steamboat service was operating between New Orelans and Nachez, Mississippi, and in 1819 the Savannah became the first steamship to cross the Atlantic.

Between 1824 and 1831, the first school of science and engineering opened in the United States, the Erie Canal opened from Albany to Buffalo, New York, the first freight and passenger-carrying rail line in the US was incorporated, and the first US-built steam locomotive, Peter Cooper’s Tom Thumb, began working the Baltimore and Ohio Railroad, replacing horses.

These milestones were the product of unfettered scientific and commercial ventures, and they were powered by coal.

Last month, Washington State’s Cowlitz County granted a shoreline-development permit to an Australian company that wants to build a shipping terminal in Longview, Washington. The company, Millennium Bulk Logistics, a subsidiary of Australia’s Ambre Energy, hopes to export 5 million tons of coal a year, brought by rail from Wyoming and Montana. The coal will go to China to fuel that country’s own industrial revolution, presumably offering the opportunity to 1.3 billion Chinese for the same unprecedented level of wealth, safety, health and comfort that we enjoy. In exchange, Millennium Bulk Logistics says the company will create 120 family-wage jobs in the Longview area during construction and 71 full-time positions at the terminal once it comes online.

But all is not smooth sailing for the terminal. Like the 19th-century Luddites that saw technology as a threat to their way of life, environmental activists, from hooded anarchists in Portland, Oregon to Hollywood stars, and all the way up to the White House, scorn the coal that continues to fuel much of our fragile economy. In 2008, on the campaign trail in San Francisco, then-Senator Barack Obama promised to price coal out of existence as a source of electricity: “So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them, because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

Locally, environmental activists are opposing the terminal, hoping the required permits will be denied by state or federal regulators. “This is an emerging area of law,” says Jan Hasselman, an attorney with the environmental law firm Earthjustice, speaking to the Seattle Times. “But we shouldn’t have commissioners in Cowlitz County making what effectively are decisions of national and even international significance.”

Some would argue that we shouldn’t have radical environmental groups like Earthjustice involved in what are effectively local decisions. Earthjustice claims 776 different members and associations, including the usual suspects like the AFL-CIO, Bluewater Network and the Humane Society, and eco-radical groups like the Basel Action Network, The Sierra Club and Greenpeace.

Of the 776 groups that make up Earthjustice, the overwhelming majority consists of attorneys, who apparently make a “non-profit” living accepting donations to sue the federal or state government, which, in turn, pays large settlements from tax receipts, presumably from the people whose jobs have been eliminated by the eco-lawyers.

It is becoming more difficult in the United States to harvest or extract our abundant natural resources, and those we can extract are considered to be too dirty to use. Now, the eco-obstructionists don’t want anyone else to use our resources either. The Luddites are back.

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Los Angeles Port Completes Phase One of Solar Power Plant

Almost three years to the day after agreeing to a settlement with state of California officials to develop a solar energy system, Port of Los Angeles officials on Tuesday announced completion of the first phase of the port's promised power generating system.

The newly completed first phase of the solar plant is located atop the port's World Cruise Center. It is a 71,500-square-foot, one-megawatt system capable of generating approximately 1.2 million kilowatt hours of electricity annually, or roughly 3,300 kilowatt hours per day. This is equivalent to the demand of about 175 average California homes, according to federal energy consumption figures.

The solar panel installation is expected to result in an annual $200,000 energy cost savings to the port. The $10.8 million phase one project includes more than 5,100 photovoltaic panels comprising a total of 1.16 million square feet – larger than the size of a football field.

The panels were installed by the San Jose-based firm Cupertino Electric Inc.

The system does not directly feed port facilities, but instead feeds into the Los Angeles Department of Water and Power electric power grid, which the port then draws upon for its electric power needs.

In early December, 2007, Los Angeles Mayor Antonio Villaraigosa and California Attorney General Jerry Brown signed an agreement calling for the port to create a greenhouse gas monitoring program and a solar power-generating plant at the Port of Los Angeles.

Under the terms of the deal, the Attorney General’s office agreed to file no legal action to stop the expansion of the port's TransPacific, or TraPac, terminal. Attorney General Brown also agreed to issue a letter in support of the TraPac project.

In return, the Los Angeles port agreed to conduct an annual greenhouse gas inventory report on port-generated activity and develop a 10-megawatt solar power plant to provide electricity for port use. In December 2009 the port issued the first annual greenhouse gas inventory report, which covered port-generated emissions in the year 2008.

The first phase of the solar panel project is being funded through a $42 million upgrade project of the port's World Cruise Terminal. Three additional project phases are slated for completion over the next five years.

The cost of the port's full 10-megawatt system, while not cited by port officials, is likely to exceed $90 million. An equivalent 10-megawatt solar cell facility, with enough capacity to power 30,000 homes, is under development in Taipei, Taiwan at a projected cost of $92 million. A 12-megawatt solar power plant in Arnstein, Germany, which opened in 2006 and labeled at the time as the largest solar farm in the world, cost $90 million to construct.

Union Supporters Turn to Employment Status in Efforts to Organize Port Drivers

With current efforts to unionize port drayage drivers either stalled in court or facing little movement in Congress, union supporters are now putting pressure on the legal definition of port truck drivers' employment status.

Trucking deregulation in the early 1980s opened the door for the proliferation of independent owner-operators, which now account for more than 80 percent of typical port drayage drivers. Owner-operators act as freelance drivers, working on a per-load basis, as opposed to employees who work on a per-hour basis.

Under current laws, only employee drivers can be unionized, not owner-operators. And yet, the nation's 110,000 port drivers offer an opportunity for unions like the International Brotherhood of Teamsters to dramatically bolster their ranks and recapture some of the national strength the union once held.

A move by the Port of Los Angeles that began in 2007 to bar owner-operators from servicing the port, instigated at the request of the Teamsters, remains tied up in a verdict-for/appeal-against tug-of-war litigation with the trucking industry and is expected to eventually find resolution only at the US Supreme Court.

An outgrowth of the Los Angeles litigation was a side effort by union supporters to change federal interstate commerce laws such that ports could legally enact measures requiring employee drivers. While gaining some initial traction at the local, state and federal level, the effort has since stalled in the ongoing Congressional gridlock.

Union supporters are now seeking to have the federal government render the whole argument moot by classifying most port drayage drivers as employees instead of owner-operators.

To support their position, union supporters on Wednesday issued a self-generated report that claims that most port drayage drivers are misclassified as owner-operators and are, in reality, working as employees of trucking firms.

"We plan to use this report as further proof to take to the administration to say 'we know you want to help, you need to do it more quickly,'" Fred Potter, director of the Teamsters port division and a vice president for the union told the Wall Street Journal.

President Barack Obama has listed the problem of businesses misclassifying employees as contractors as one of the priorities of his administration's Middle Class Task Force and provided funds for the Department of Labor and the Internal Revenue Service to work together to deal with the issue. While the Government Accounting Office admits that the extent of misclassification is unknown, it is estimated that it may apply to somewhere between 10 percent and 30 percent of US businesses.

The new report, titled “The Big Rig: Poverty, Pollution and Misclassification of Truck Drivers at America’s Ports,” was authored by members of Change to Win, a union umbrella group spearheaded by the Teamsters, the National Employment Law Project and Rutgers University.

The report, through a survey of nearly 2,200 drivers nationwide, claims that trucking firms are actually using the drayage drivers as employees because the firms determine how, when, where, and in what sequence drivers work. The report also claims that drivers are financially dependent on trucking companies that unilaterally control the rates that drivers are paid and that drivers are financially linked long-term to trucking firms.

In conclusion, the report calls for port authorities to adopt employee-only rules like those now under litigation in Los Angeles and for Congress to pass legislation allowing local port authorities to determine the classification of their port-servicing drivers.

The trucking industry has argued that independent owner-operators, in the majority of cases, choose this status as opposed to working as per-hour employees.

While the American Trucking Associations, an industry trade group representing more than 37,000 trucking firms nationwide, does not argue that in some cases the owner-operator model has led to state-to-state inconsistencies in classification, ATA officials told the US Department of Labor last year that, “The owner-operator business model is deeply ingrained in the trucking industry, with benefits to both the owner-operators and the motor carriers with which they contract. The interstate nature of the trucking industry makes it vulnerable to inconsistent state regulation in terms of worker classification and the uniformity needed by the industry can only be achieved through consistent application of a consistent legal standard.”

While union supporters continue to claim that their efforts are directed at improving the condition of the drivers, it is clear that some in the current administration understand the underlying issue.

Deputy Secretary of Labor Seth Harris told Congress earlier this year that while the agency is looking toward actions that would place a tighter reign on employee classification of drivers, "All of this is just to simply turn these people into employees one way or another so that unions can make the effort to organize them."

Seattle Port Board Ends Year on Environmental Note

In their last actions of the year, the governing board for the Port of Seattle on Tuesday approved $15 million for environmental remediation projects in 2011 as part of a five-year $68 million environmental program.

The port commission also approved a $5 million investment in the South Park Bridge replacement, and finalized an agreement with Puget Sound Energy that will see the energy firm purchase easements along the Eastside Rail Corridor for $13 million.

“Last week, we authorized a budget that reflects the priorities of generating jobs and protecting the environment,” said Commission President Bill Bryant in a statement.

“Today’s actions show that we are prepared to hit the ground running in 2011.”

The approved $15 million in environmental remediation funding will be split between projects at the seaport and at Seattle-Tacoma International Airport. The majority of the remediation funding will go toward cleanup of the Lower Duwamish Waterway Superfund site.

Along with partners King County, the City of Seattle, and the Boeing Company, the port is working with the US EPA and the Washington Department of Ecology to develop a remediation plan for the site. Specific projects include Terminal 117 sediments, bank and uplands; cleaning up contamination at Terminal 115 from former operations; and several other complementary projects throughout the Lower Duwamish area.

In addition, funding will go toward Sea-Tac remediation work at the former Lora Lake Apartments complex; remediation of groundwater at the former Olympic Fuel Farm site; and long-term monitoring of groundwater at Seattle-Tacoma International Airport. The port authority's Real Estate Division will also receive funding to continue clean-up efforts at Terminal 91, Fishermen’s Terminal and Terminal 5.

Mexican West Coast Megaport Appears Back On Track

The on-again, off-again development of a proposed Mexican West Coast megaport appears to be back on track, according to recent statements by a Mexican government official.

With a proposed location just 150 miles south of the US/Mexico border, the Punta Colonet port is envisioned as a direct competitor for Asian cargo with US West Coast ports such at the Southern California ports of Long Beach and Los Angeles.

Over the past five years, the proposed plan has faced numerous delays and changes in both the scope and scale of the development. All movement on the development ceased sometime in early 2009, with most account citing the growing worldwide economic downturn.

However, Mexico's Secretary of Communications and Transport Juan Francisco Molinar recently indicated to attendees at a national port meeting in Mexico that plans for the Punta Colonet port were back on track. Given that Mexico has seen a 30 percent increase in Asian traffic this year, Molinar said, "I think we're on the right track to put Mexico on the logistics platform."

As a possible Mexican rival to the dominant Southern California ports, the development of Punta Colonet has raised concerns in the American shipping industry about a major shift of cargo to south of the US/Mexican border. The Colonet port would deal almost exclusively in US-destined container cargo from Asia that would head from Colonet via rail into the US southwest and then east to the US Midwest and Eastern Seaboard.

While Molinar offered no additional details in his recent comments on the current vision of a Colonet port, differing versions of the port plan in the past have ranged in cost from $1 billion to as much as $9 billion and varied in scale from smaller than the Port of San Diego to as large as the ports of Long Beach and Los Angeles combined.

In 2007, Mexican Deputy Transport Minister Manuel Rodriguez told Reuters that he expected the proposed port to be in the 5 million TEU-a-year size range, making Punta Colonet about the size of the New York/New Jersey port complex, the United State’s third busiest container port complex.

Rodriguez also told Reuters at the time that he expected the bids for the project to come in at a range between $5 billion and $6 billion. The Mexican government’s vision of the port in late 2008, shortly before movement on the plan ceased altogether, envisioned a Punta Colonet port about a third the size of the LA/LB complex, currently the busiest in the Western Hemisphere handling a collective total of about 15 million TEUs per year.

Despite the ups and down of the project, the Mexican government appears to be committed to building something at Punta Colonet.

In 2007, the Mexican government announced plans to spend upwards of $44.5 billion to upgrade and expand the country’s transportation infrastructure under President Felipe Calderón's $250 billion national development plan for 2007-12. The development of infrastructure to support Punta Colonet featured heavily in several major components of Calderón's plan.

In September 2008, Calderon personally opened bidding for the Punta Colonet megaport development, described at the time as the largest maritime project in the nation’s history.

“The physical space of Colonet is four times greater than the Port of Los Angeles and represents more than five times the space of the Port of Long Beach, in California,” said Calderon.

Colonet’s location, said Calderon, would allow Colonet to offer “greater dynamism and efficiency” for containers moving from Asia through the US West Coast ports to east-of-the-Rockies US markets.

“Colonet is going to tie together the productive chains of Asia and North America,” Calderon said. “We are going to connect Mexico with the world and continue opening the door of solid growth for our economy--one that allows us to not only compete, but to win in the global economy in which we live.”

Although some domestic Mexican cargo will undoubtedly move through Colonet, at least some of the estimated 2 million TEUs per year projected to be handled on the opening of Punta Colonet's first phase would likely come at the expense of the Long Beach and Los Angeles ports.

The contracts opened up for bid by Calderon included development of marine terminals at Punta Colonet as well as a rail component that would connect the port to the US mainline rail tracks in the US Southwest. The developer, under the plan at the time, would also have been expected to operate the developed port facility under a 45-year concession agreement with the Mexican government.

In January of 2009, the Mexican government promised slightly more than $1 billion to the Colonet project with plans to obtain the rest of the financing through a public/private partnership with the eventual facility operator.

At the time, several large consortia indicated they would bid on the project, including:
  • A partnership between Mexican billionaire Carlos Slim Helu and the New Jersey-based terminal operator Ports America Group.
  • Mexican construction firm Ideal.
  • US marine terminal operator SSA Marine.
  • A consortium formed by former Ensenada municipality president and Baja California Gov. Ernesto Ruffo.
Ruffo’s group, Puerto Colonet Infrastructure, had secured what none of the other potential bidders at the time were able to: the support of the Punta Colonet locals and titular landowners.

The largely undeveloped future location of the Colonet port is surrounded by farmland tracts owned by established local families. Called ejidors, these communally-owned farm tracts were deeded to the local families by the Mexican government in the late 1940s and are passed down from family member to family member.

In addition to the prime coastal real estate at the projected site of the port, a large dry riverbed -- in some areas more than a half-mile wide and running from its outlet at the Colonet Bay through a gorge in the Sierra Juárez Mountains 40 miles away and the most logical location for a port rail line – is also ejidor land.

While Hong Kong-based port operator Hutchison Port Holdings originally purchased a small tract including the riverbed outlet on the Punta Colonet bay from a small group of ejidors, as of 2009, Hutchison’s Colonet property was surrounded by property either owned by Ruffo’s PCI or ejidors that were willing to sell to PCI.

As head of PCI, Ruffo also developed a very detailed plan that sought to take circumvent the Hutchison tract and full advantage of Ruffo's property commitments, land he already owned and the local terrain.

Ruffo’s and PCI’s long-range plan for the port at the time envisioned a megaport that would rival any in the world, with 18 berths that would each accommodate the largest of container vessels. Each berth, according to Ruffo, would be able to handle 850,000 TEUs annually. The port would ship about 60 percent of the containers inland via rail, handle about 30 percent as transshipments, and send the remaining 10 percent out on trucks.

It is unclear if Ruffo, or any of the previously interested bidders, is still involved or interested in any potential development of the Punta Colonet port.

Regardless of who wins the contracts, any potential bidder will ultimately have to negotiate with U.S. rail giants Union Pacific or BNSF, which control the mainline tracks running through the U.S. Southwest. UP had originally been a potential bidder, but pulled out of a proposed partnership with Hutchison in 2008. On breaking the Hutchison partnership, UP indicated it was still open to bidding with another partner on the Colonet project.

Tuesday, December 7, 2010

TSA Chief Reviews TWIC Reader System at Long Beach Port

John Pistole, Administrator of the US Transportation Security Administration, visited the Port of Long Beach last week to view the latest iteration of TWIC card readers now being tested at several port terminals.

The Transportation Worker Identification Card, or TWIC, is a national identification system that requires transportation workers, including those in the maritime industry, to pass background checks before accessing port facilities. All workers requiring regular access to port facilities, such as dockers or drayage truck drivers, are required to have them. According to the TSA's latest statistics, just over 1.6 million TWIC cards have been issued since 2006 with about 150,000 applications currently pending.

At facilities where readers are not installed, TWIC cards are visually checked. In the case of a question being raised, information from the card can be input electronically and checked for validity online with the TSA. The readers would accomplish the same task, but each card would be checked against TSA records each time the card is swiped.

Pistole, along with other federal officials, visited the port's Pier A facility, one of five Long Beach terminals with the under-development readers installed. Long Beach is one of the few port complexes in the U.S. selected to participate in the long-term pilot project to develop the readers. The TSA first put out a call for the development of the readers in May, 2008, and several versions have been developed under the pilot program.

During a meeting at the Port's Command and Control Center hosted by Port of Long Beach Director of Security Cosmo Perrone, Pistole commended the partnership and cooperation he witnessed during his visit and reminded all present "we are all in this together."

Vancouver USA Named Top Washington State Port

The Port of Vancouver USA has been named top dog among Washington state's nearly 70 ports by the Washington Public Ports Association.

In naming the Vancouver USA port as the 2010 Port of the Year, the WPPA cited the port for creating transportation connections including the June 2010, completion of a state-of-the-art unit train facility at the port's recently developed Terminal 5. The $14 million project, part of the ongoing West Vancouver Freight Access rail improvement project, was completed on time and on budget.

The annual award, meant to honor leadership and innovation in economic development efforts, also acknowledged the port's role as a sponsor in the recently completed Lower Columbia Channel Deepening Project.

"The Port of Vancouver was presented this award because of their tremendous recent success in bringing jobs and investment to Clark County. They are a shining example of how to spur job-creation, and they have been recognized by their peers for their hard work," said WPPA Executive Director Eric Johnson.

The WPPA noted that the port's investments to date are attracting almost $400 million in private investment and the anticipated creation of between 1,000 and 2,000 new, permanent jobs and nearly 4,000 construction jobs.

"A prospective major tenant at the Port of Vancouver said they were drawn to the port because of the capability and professionalism of its staff and by the significant investment the port had made in rail infrastructure," said Port of Vancouver Commission President Jerry Oliver. "The Port of the Year award is a reflection on the staff and the economic vitality they bring to Vancouver."

Researchers to Study Impacts of Columbia Snake River Closures

Washington State University researchers plan to use a three-month shut down of navigation locks on the Columbia and Snake rivers this winter to study the economic role the rivers' barge traffic plays in regional goods movement.

The Army Corps of Engineers plans to shut down the rivers Dec. 10 to replace gates at three sets of locks, including those at the Dalles and the John Jay dams on the Columbia, and gates at the Lower Monumental dam on the Snake. The Army Corps is scheduling to have the locks replaced and the rivers reopened by March 18, 2011.

While each of the locks is typically shuttered for routine maintenance for two to three weeks a year, the three-month shutdown will be the longest.

According to industry statistics, more than 8 million tons of cargo, worth up to $2 billion, move on barges over the two waterways, including nearly 40 percent of the regional wheat exports.

Agriculture exporters have been moving up or delaying shipments to prepare for the
The Port of Portland announced recently that it plans to offer incentives to shippers currently exporting through Portland to truck goods during the river closures to Portland, instead of heading to Tacoma or Seattle.

As one part of their study, researchers plan to look at how the higher cost of truck and rail shipping may impact the prices of commodities normally shipped via the rivers. The WSU team also hopes that the research may be useful to other river shipping routes that face similar disruptions, such as the Mississippi.

Long Beach Port Signs Info Exchange Agreement With Panama Canal

The Port of Long Beach and the Panama Canal Authority on Dec. 7 signed a memorandum of understanding covering a series of efforts to promote more trade between Long Beach and countries in the East Coast of South America and the Caribbean, via the Panama Canal.

The MOU calls for the port and Canal Authority to exchange ideas on dredging technology, engineering, environmental practices, and marketing.

“Latin America is a relatively small but an emerging trade partner for our region,” said Port of Long Beach Executive Director Richard Steinke. “This partnership will help increase our reach to this market as it expands.”

Panama Canal Authority Administrator/CEO Alberto Alemán Zubieta noted that Long Beach is a key logistics leader and the Canal Authority looks “forward to promoting the Canal to increase international trade among Long Beach, Latin America and the Caribbean."

Long Beach Harbor Commissioner Mario Cordero said that the MOU helps expands an international network of maritime entities dedicated to pursuing green, sustainable developments.

“The Port of Long Beach is dedicated to growing that network and has signed similar agreements with several ports in China, Europe and Mexico,” said Cordero.

While trade with Latin America accounts for a small percentage of the port's annual trade volume, port officials hope to tap into emerging manufacturing markets to boost future trade. The Canal is undergoing an expansion project expected to be completed by 2014, which will allow larger ships to transit through.