Thursday, December 16, 2010

CA Port Volumes Slow, But Well Above 2009 Levels

While container volumes at two of California's three major ports slid to pre-peak season levels in November, monthly volumes at all three easily surpassed volumes from the year-ago period in 2009.

Total container volumes at the ports of Los Angeles and Oakland in November slid to levels close to those seen in May, just before container volumes at both ports began to ramp up significantly for the peak shipping season which traditionally runs from June to October. However, the Port of Long Beach, while seeing a sizable drop off in total container volumes in November compared to October, still turned in numbers equal to the other peak season months of 2010. This may indicate that at least some cargo owners are shipping early for the winter season to avoid the typical shipping slowdowns related to the Chinese New Year, which occurs somewhat early in 2011.

In addition, all three ports have experienced an out-of-cycle jump in the number of loaded export containers handled over the past two months. Export numbers for October and November at all three ports have increased to levels typically seen in the early months of the year, the traditional export peak season as raw materials head to foreign manufacturing centers in anticipation of producing finished goods for return to the US months later in the back-to-school and holiday seasons.

The Port of Long Beach moved a total of 558,307 TEUs in November, a 24.6 percent gain over November 2009. The port handled a total of 274,480 loaded import TEUs during November, a 20.2 percent increase over the year ago period. The port also moved a total of 142,628 loaded export TEUs, a 24.8 percent increase over the same month in 2009.

Long Beach remains on track to end the year with well above 20 percent growth, with 5,740,188 TEUs handled in the first 11 months of 2010, or 24.8 percent higher than the January to November period last year.

Across San Pedro Bay, the Port of Los Angeles in November handled a total of 666,971 TEUs, a 15 percent increase over November 2009. Los Angeles officials report handling 333,710 loaded import TEUs in November, an 11.7 percent increase over the year-ago period. The port also handled 170,319 loaded export, a 14.2 percent increase over November of last year.

Los Angeles has moved just over 1 million TEUs in the calendar year, a 16.7 percent increase over the first 11 months of 2009.

Up the coast in the Bay Area, the Port of Oakland reported moving a total of 201,530 TEUs in November, a 16.2 percent increase over November of last year. Oakland officials report moving 67,342 loaded import TEUs in November, a 14.1 percent increase over the year-ago period. The port also handled 88,212 loaded export containers in November, a 2.8 percent increase over the same month last year.

Oakland has moved 2,142,249 TEUs during the first 11 months of this year, a 15.3 percent increase over the January to November period in 2009.

Beacon Analysis: California Sets Export Record in October

California exporters turned in their best performance ever for the month of October, beating the previous record set back in October 2007 by 1.1 percent, according to a Beacon Economics analysis of the most recently available foreign trade data from the U.S. Commerce Department.

"Our export trade is now operating at a pace not seen since the onset of the Great Recession," said Jock O'Connell, Beacon Economics' International Trade Adviser.

Golden State businesses shipped $12.91 billion in goods abroad in October, surpassing the $11.08 billion in goods exported in the same period last year by a sizable 16.5 percent margin.

Exports from California manufacturers also jumped in October, climbing 10.7 percent compared to October 2009 and shipments of Golden State agricultural goods and other non-manufactured products increased a significant 34.6 percent over the year-ago period. Re-exports of items previously imported into the state, said the Beacon report for October, also jumped by 25.2 percent.

October, in which California accounted for 11 percent of all U.S. merchandise exports, marked 12 straight months year-over-year increases in the state's export trade.

Loaded export container volumes at the Southern California ports of Long Beach and Los Angeles increased by 11.8 percent from October 2009, while Los Angeles International Airport saw a 31.4 percent increase in exported air freight tonnage.

In the Bay Area, loaded export container volumes at the Port of Oakland rose by just 0.3 percent while exported air freight tonnage through San Francisco International jumped up by 15.8 percent from last October.

Beacon also reports that U.S. Commerce Department data shows that California’s merchandise import trade totaled $28.85 billion in October, an increase of 7.2 percent over last October. The Golden State accounted for 17 percent of all U.S. merchandise imports in October.

Beacon's O'Connell was optimistic about strong employment growth resulting from the increase in export activity.

"At some point, you would naturally expect higher exports to goose the employment numbers," said O'Connell. "However, California firms have made great strides in efficiency, enabling them to do more with less. Bear in mind that, while manufacturing output in this state increased by about 50 percent in this decade, employment in our manufacturing sector declined by one-third."

According to Beacon's analysis of California Employment Development Department data, there are currently about 4,800 fewer workers in the manufacturing sector and 6,800 fewer in the transportation and warehousing sector than there were last October.

"Exporters are also likely to be worried about the outlook for California exports going into the New Year," O'Connell observed. "Austerity measures across Europe, an appreciating Japanese currency, unrest in Mexico, and renewed efforts by Chinese authorities to slow down their economy could all put a serious damper on California exports," he explained.

Bellingham Port Inks Site Cleanup Deal With Oil Firms

Officials from the Washington-state Port of Bellingham and three oil firms have worked out a preliminary deal to clean up a contaminated parcel of port-owned property.

The site, located at 2801 Roeder Ave. near Squalicum Harbor, has operated as a bulk fueling terminal by various operators for more than 70 years.

The facility is currently operated by the Bellingham-based Yorkston Oil Co., Inc., which owns and operates Yorky's markets in Whatcom County, Washington, Commercial Fuel Network sites in Whatcom and Skagit counties, distributes to unbranded dealers, and serves numerous independent and commercial accounts with heating fuels, industrial/motor oils, marine fuels, and on- and off-road fuels.

The port has worked out a cleanup cost-sharing deal with Yorkston, and previous facility operators Chevron and ExxonMobil. Under the terms of the preliminary deal, Yorkston will pay 40.5 percent of the cleanup, Chevron 36.9 percent, ExxonMobil 12.6 percent and the port 10 percent.

While port officials cite no evidence that ground contamination from the facility have leeched into Squalicum Creek, the Bellingham Herald reports that previous studies have found fuel-related materials in the soil and groundwater on the site. These environmental investigations, the Herald reports, are high enough to trigger a mandatory cleanup under Washington state environmental laws.

Port officials said that the cleanup project is likely to cost in the neighborhood of $1 million and take several years to complete. Yorkston will continue operating at the site during the cleanup.

WWII Munitions Cleanup Begins at Seattle Cruise Facility

While falling short of saying that old military munitions found on the seabed under a Port of Seattle cruise terminal presented no danger, a commander for the Army Corps of Engineers said Wednesday that the explosives were not a major threat.

While the munitions need to be addressed, said Army Corps commander of the Seattle area Col. Anthony Wright, his office said in a statement that, "There is a low explosive hazard risk associated with discarded military munitions and no explosive hazard risk associated with munitions debris."

The World War II-era debris, including live munitions and non-explosive debris from various munitions, were discovered by port police divers performing routine underwater security sweeps in April. Additional dives by the US Coast Guard in the summer located more munitions. The munitions, which have been removed as they have been found, have all been located near the berthing area at the port's Terminal 91 cruise facility.

The U.S. Navy used the pier between the 1930s and 1970s, in part, to load ammunition aboard Navy vessels. It is speculated that the munitions and debris fell overboard or was discarded during these loading procedures. They sat hidden in the muck on the bottom until, in the most accepted scenario, the bow thrusters of modern cruise ships calling at the pier uncovered the munitions.

The Army Corps is leading a $10 million cleanup effort in conjunction with the Coast Guard, EPA, Navy and port. The Army Corps began the project on Dec. 14 with an assessment of the areas around piers 90 and 91 using sonar, remotely operated vehicles, and divers.

"This assessment will provide the basis for using digital geophysical mapping and divers to perform a surface and subsurface removal of military munitions," said an Army Corps statement.

The cleanup project is expected to be complete by April 15, 2011, just prior to the start of the cruise ship season.

Tuesday, December 14, 2010

Appeals Panel Agrees to Speed Up Los Angeles Port Truck Plan Suit Appeal

A federal appellate panel has reversed its earlier decision and agreed to speed up an appeals hearing of ongoing litigation over the Port of Los Angeles clean truck program.

In mid-November, the United States Ninth Circuit Court of Appeals denied a request to expedite an appeal regarding the truck program litigation. Immediately after the decision, the trucking industry defendant in the case, the American Trucking Associations, asked the appellate court to reconsider the request.

The expedited schedule for the appeals hearing will push the case forward by about two months, according to ATA officials.

The appellate panel order now sets the deadline for the opening ATA brief on December 28, 2010; the port answering brief is due January 31, 2011; and the optional ATA reply brief is due within 14 days after service of the answering brief. The Ninth Circuit stated that after the briefings are complete, the case "shall be calendared as soon as possible.”

The ATA sued the port over key components of the truck program in 2008, claiming that the part-environmental, part-social justice program violates federal interstate commerce laws.

District Court Judge Christina Snyder ruled against the ATA in the suit in September, arguing that the port is exempt for federal commerce laws because it operates as a "market participant" in port drayage. In her ruling she also dissolved an injunction against portions of the truck plan. At the request of the ATA, Judge Snyder subsequently reinstated the injunction against the employee mandate until the appeals court can hear the case.

In her reinstatement ruling Judge Snyder said that while confident of her earlier ruling in favor of the port, she recognized that "the interpretation and the application of the 'market participant doctrine' in this case presents substantial and novel legal questions."

She also determined that the trucking industry was likely to suffer "irreparable harm" if the employee-only mandate was allowed to be implemented by the port and was later overturned.

The original ATA suit centers around a Los Angeles port truck program that took effect in October 2008 requiring port-servicing drayage firms to sign so-called concession agreements to gain access to port terminals. Firms without such an access license are barred from entering port facilities. The truck plan was originally conceived by the port (at the time including the Port of Long Beach) as a means to bar older polluting trucks and force port-servicing trucking firms to use newer and cleaner burning vehicles, thereby cutting port-generated diesel emissions.

However, Los Angeles port officials included non-environmental criteria in the concession agreements, such as financial, maintenance, insurance, safety, parking and labor criteria. Critics of the truck program's non-environmental components, such as the employee-mandate, have accused the port of engaging in social engineering above and beyond their role as a commercial entity.

The Port of Long Beach, which helped develop the truck plan and was a defendant in the original ATA lawsuit, reached a court-approved settlement with the ATA in 2009 that allowed the Long Beach port to implement all of the environmental aspects of the truck plan, as well as most of the non-environmental aspects. The Long Beach version of the truck plan never called for an employee-only mandate.

SoCal Floating Petroleum Terminal Wins 30-Year Lease Extension

The California State Lands Commission on Friday approved a 30-year lease extension for a Southern California offshore petroleum terminal to oil giant Chevron, despite opposition by environmentalists and members of the public citing the recent BP oil disaster in the Gulf of Mexico.

The State Lands panel voted 2-1 to approve the $1.3 million per year lease for 221 acres of tidelands at the El Segundo Marine Terminal, which allows tankers to moor 1.5 miles west of the Los Angeles coastline at two locations and discharge petroleum products to an onshore refinery via underwater pipelines. The lease also calls for annual adjustments to the base lease amount based on the Consumer Price Index.

The offshore facility, one of the few of its type remaining in California, is used for handling imported petroleum, gasoline and other finished fuels to the Los Angeles area.

Supporters of the lease extension cited the crucial importance of the facility in providing Los Angeles regional fuel needs and the overall importance of Chevron to the local economy.

Opponents of the lease raised concerns about potential oil spills at the facility similar to the BP spill, which supporters of the facility dismissed by citing a nearly exemplary safety record for many years with only one sizable spill of 21,000 gallons since 1980, when the facility's last major spill released 105,000 gallons of oil.
Opponents also called for a much shorter 10-year lease extension and wanted to see some of the facility's cargo handled at the nearby Port of Los Angeles, though Chevron said this was not possible due to the lack of connecting pipelines from the port to the on-shore El Segundo refinery. The Chevron refinery processes about 275,000 barrels of oil per day.

San Diego Port Names Darbeau as President/CEO

Commissioners have appointed Wayne Darbeau as president and chief executive officer of the San Diego Unified Port District, filling a seat abruptly vacated in September by Charles Wurster. Darbeau has served as interim president and CEO of the port authority since October.

Darbeau, who has served in several key executive position since joining the port in 1998, most recently served as the port authority's vice president of administration prior to being named interim president and CEO.

"We considered a nationwide search for this position, but we realized that the person who has the best qualities to move this organization forward was right here," said Robert Valderrama, Chairman of the Board of Port Commissioners. "We're elated that we found someone of such high caliber within the organization to lead us into the future."
In his new role, Darbeau will oversee the 600-plus member staff of the port authority, which manages the Port of San Diego and the public lands along San Diego Bay. The port authority manages two primary cargo facilities, a cruise terminal and more than 400 leases with various port-property tenants. Last year, the port reported revenues of $134 million.

Former port authority president and CEO Wurster resigned abruptly and without explanation on Sept. 24. The board later said the departure was a mutual decision between the commission and Wurster.

State Audit Critical of Seattle Port Real Estate Deals

The Washington state auditor's office on Monday released its second major audit in three years of the Port of Seattle, finding that while the port may have addressed many problems since the first audit in 2007, there remains room for improvement.

The 42-page report included a performance audit report that reviewed the Port’s real estate purchases and leases, crane management and Fishermen's Terminal management, strategic planning and three programs' accountability and compliance with laws and regulations. The audit also included an accountability report, which found the Port did not adequately monitor management contracts and another accountability report, which reviewed the Industrial Development Corporation of the Port of Seattle and found that the Corporation adequately safeguarded public assets.

The performance review portion of the audit found numerous oversight and management failing in regards to real estate transactions.

For example, the audit found an accounting error that led to a $4.1 million undercharge on a port property land transaction.

During the 2004 sale of the 28-acre Terminal 106E, port officials had the property appraised at $27.7 million--which the port later lowered to $23.7 to reflect approximately $4 million in improvements the buyer said were to be done of the facility.

According to the audit, port staff inadvertently subtracted the roughly $4 million from the sale price on two separate occasions, leading to a $4.1 million loss for the port.

The 42-page report also highlighted the port's $5.5 million purchase of a steel mill, done, according to the audit, without fully assessing the property's environmental contamination which in turn lead to the port abandoning development at the site.

In light of such transactions, and other identified problems such as the use of outdated market data resulting in low lease rates, the audit recommends that the port commission take over direct control of the Real Estate Management Division.

The state auditor made the same recommendation in 2008, after a 350-page audit of port operations between 2004 and 2007 found nearly 50 indications of financial and contracting irregularities or fraud. In addition, the 2007 audit found that the port wasted nearly $100 million in taxpayer money through improper construction contracting. Released in December 2007, the audit led to a United States Department of Justice investigation into the accusation of fraud at the port. At the time, the state auditor’s office was unable to prove fraud due to state regulations putting the collection of substantiating evidence outside the legal mandate of the office.

Following the scathing 2007 audit, the port adopted numerous oversight and accountability measures, including more direct oversight of port operations by the port commission.

In all, the recent audit made 10 recommendations to the port, with most centered around port leadership providing more oversight, more consistent application of port policies, and additional diligence by port staff.