Thursday, January 6, 2011

FIDLEY WATCH - Changing of the Guard

January 2011

A recent press release from Marine Resources Group (the holding company for Foss Maritime, based in Seattle, AMNAV Maritime Services, based in San Francisco, and Hawaiian Tug & Barge/Young Brothers, based in Honolulu) signaled the acquisition of the assets of Cook Inlet Tug & Barge, based in Anchorage. It will operate as an independent subsidiary, effective Jan. 1, 2011. The family-owned Alaska company, which traces its history to 1923, has 10 employees and operates three tugs and one barge.

“Cook Inlet Tug & Barge is a perfect fit for our group,” says Paul Stevens, MRG chief executive officer. “We have broad experience in the harbor services business in the Lower 48 and in Hawaii, and this acquisition is a logical expansion into Alaska’s largest commercial port.”

Cook Inlet’s current owner, Carl Anderson, will remain at Cook Inlet Tug & Barge in a consulting capacity to support the business during the transition. All other employees are expected to stay with the company, including Capt. Brad Kroon, who will have overall management responsibility, and Capt. Katrina Anderson, Carl’s daughter, who will provide operational, administrative and safety-related support. Also with the company is Carl’s son Garrett, who works on the tugs.

“Dad’s thinking about retirement,” says Katrina Anderson, who notes that the business isn’t as simple as it used to be. “MRG wanted a presence in Cook Inlet, and we’re here,” she says. “It’s a pretty good fit.”

Katrina Anderson points out that, on top of his consulting duties, her dad still owns and operates related businesses in Anchorage, including Knik Dock Co. “He’ll still be pretty busy.”

I got Carl in trouble with some of our readers once, about ten years ago, when I ran a photo of one of his deckhands working the lines while bringing a TOTE ship into port. I took the photo myself – it was a balmy June day and the deckhand, wearing sandals and shorts, was standing outboard of the rail of the tug, on the rubber fender, passing a line over a Panama hook in the hull of the SS Great Land.

We got letters. Apparently there were safety violations taking place, and the responsible mariners in the lower 48 were (rightly) quick to point them out: open toed shoes, no harness, no personal flotation device, standing outside the rail, etc.

Carl was a good sport about the whole thing. He noted that the same guy had to do the same job in the dark in January in 40-knot winds and freezing spray and five-foot seas (when the sea wasn’t two feet of ice), and if he wanted to take advantage of the weather in June, Carl couldn’t hold it against him.

Times have changed.

In Seattle, things are changing, too. Late last month, Vigor Industrial LLC and Seattle’s Todd Shipyards Corporation entered into an agreement under which Vigor will acquire the shipyard for $22.27 per share, or $130 million. Vigor’s offer expires on January 28th, 2011. Todd’s management will remain intact, and all contracts will remain in place.

Todd has operated a shipyard in Seattle since 1916, and also operates facilities in Everett and Bremerton, Washington. Vigor, an Oregon company, operates several shipyards including Cascade General, US Barge and Washington Marine Repair.

Four Groups File to Join ATA Appeals Case Over LA Port Truck Program

Four Groups File to Join ATA Appeals Case Over LA Port Truck Program
Four groups, including three major trade industry associations, asked a federal appeals court on Wednesday to join the American Trucking Associations' ongoing litigation over the Los Angeles port's trucking program.

The four groups are: the National Right to Work Legal Defense Foundation; the Intermodal Association of North America, or IANA; the Owner-Operator Independent Drivers Association, or OOIDA; and the Harbor Trucking Association, or HTA, in a joint filing with the Center for Constitutional Jurisprudence.

The National Right to Work Legal Defense Foundation is a legal aid non-profit that in this case is representing the interests of several truckers who work in the Southern California drayage industry.

The other three groups are well-known trade industry organizations representing wide swaths of the shipping, international trade and transportation industries.

IANA, one of North America's leading industry trade associations, represents the combined interests of the intermodal freight industry. IANA's membership roster of more than 900 corporate members includes railroads – Class I, short-line and regional; water carriers and stacktrain operators; port authorities; intermodal truckers and over-the-road highway carriers; intermodal marketing and logistics companies; and suppliers to the industry such as equipment manufacturers, intermodal leasing companies and consulting firms.

OOIDA, the largest driver-based trade group, represents the interests of nearly 160,000 independent owner-operators and professional driver members in all 50 states and Canada.

The Harbor Trucking Association, which represents more than 80 trucking firms which service the ports of Long Beach and Los Angeles, and the other groups each asked the Ninth Circuit Court of Appeals to allow the groups to join in support of an ATA appeal before the court as amicus curiae, or “friends of the court.”

The HTA – which is not connected to the ATA – and the other groups reiterated in their filing several of the key arguments that the ATA has maintained since the start of the litigation: only the federal government can set certain regulations on interstate commerce, not local port authorities as in the case of the truck program; and, the lower court erred legally in ruling in favor of the Los Angeles port.

Portions of the trucking program were implemented by the port in October 2008. However, several key components, including a requirement forcing all port-servicing trucking to hire per-hour employee drivers instead of per-load independent owner-operators, had been enjoined by the lower court while the ATA case was being heard.

District Court Judge Christina Snyder's Sept. 15, 2010, ruling in favor of the port dissolved the injunction, but nine days later she agreed to an ATA motion to keep the injunction in place on the employee-mandate while an appeal to her ruling was being heard by the Ninth Circuit.

Late last year, the Ninth Circuit Court approved an expedited time frame for a hearing, ordering the ATA to file their briefs no later than Dec. 28, 2010 and the port to file their arguments no later than January 31.

In their filing, HTA attorneys argue that the basis of the lower court ruling in favor of Los Angeles – that the port was exempt from federal laws because the port was operating as a market participant in the local drayage industry – was legally flawed and not supported by case law.

The HTA also argued that the truck program regulations, if fully implemented, would drastically reshape the local drayage industry, where more than 80 percent of all port-servicing drivers are currently independent owner-operators.

"These [truck program] regulations are devastating to the small businesses that work in the drayage industry," said the HTA filing. "Where Congress sought to encourage competition, these regulations seek to destroy it. Where Congress sought to reduce barriers to entry, these regulations seek instead to erect new barriers. Where Congress sought to drive down prices through efficient competition, these regulations seek instead to increase prices through reduced competition."

The HTA filing was prepared in conjunction with the Center for Constitutional Jurisprudence.

As a “friend of the court” party to the suit, the HTA would not be allowed to argue as a direct party to the case, but can volunteer information on points of law under discussion or other aspects of the case to assist the court in reaching a decision.

Los Angeles City Council to Revisit Failed Port Shipyard Reuse Plan

Less than three weeks after the Port of Los Angeles declared that it was ending all negotiations with a Long Beach firm hoping to redevelop a shuttered shipyard at the port, the future of the proposed shipyard will now return to the Los Angeles City Council for further consideration.

Councilmember Janice Hahn, whose district covers the port, asked her council colleagues on Tuesday to revisit the shipyard proposal by Gambol Industries, Inc.

Gambol's plan called for a $50 million re-development of the shuttered South West Marine shipyard along the main channel of the port into a modern ship repair facility. The firm, which claims it has a solid business plan that would create hundreds of jobs at the proposed facility, has faced stiff criticism from the port, shipping industry, and longshore unions. However, under pressure from Los Angeles City Hall, the port signed a memorandum of understanding with Gambol in 2009 to consider the development of the ship repair facility.

Port officials have maintained that the Gambol plan was unrealistic and could seriously delay an Army Corps of Engineers channel-deepening project and ongoing terminal development at the port. The port envisioned the former shipyard slips as a perfect location to deposit dredge material from the Army Corps project.

The shipyard proposal will now return to the Los Angeles City Council's Trade, Commerce and Tourism Committee, which is headed up by Hahn. In February 2010, Hahn stepped down as the impartial mediator between the port and Gambol after it was revealed she received $7,000 in political contributions from the president of Gambol.

According to data from the Los Angeles City Ethics Commission, Gambol has paid more than $720,000 to various lobbying firms between 2007 and the end of 2009 to advocate for the project at City Hall.

In the early 2000s, the adjacent Port of Long Beach found itself in possession of the federal government-shuttered Long Beach Naval Shipyard and port officials spent several years trying to identify a firm that could present a viable plan to redevelop the navy yard into a commercial shipyard. While several firms stepped forward, the plans never materialized and the drydocks were eventually filled with dredge material and paved over to add additional acreage to a massive container terminal under development at the time.

Bellingham Port Selects New Board President

In an internal vote Tuesday, the three members of the Port of Bellingham's governing board have selected commissioner Mike McAuley to serve as the board president for 2011.

McAuley, who joined the port board for a four-year term in 2009, told the Bellingham Herald that his goal over the next year is to focus greater public outreach. McAuley was also selected to serve on the Whatcom Council of Governments board.

Port commissioner Scott Walker was selected to serve as vice president of the port board in 2011, while commissioner Jim Jorgensen was selected as board secretary.

All three will also serve in the same new officer positions on the Industrial Development Corporation Board for 2011.

Walker also was selected to serve on the boards of the Northwest Economic Council, Port Public Art Advisory Committee, and Washington Public Ports Association. Jorgensen will be on the Whatcom County Economic Development Investment Program Committee board.

Coos Bay Port Takes Ownership of Rail Corridor

Officials at the Oregon-state Port of Coos Bay, in a deal with Class-I railroad Union Pacific, have taken ownership of a 23-mile of UP track running from Eugene to Coos Bay.
Port officials plan to restore the line with the intention of opening it to freight traffic by mid-2011 with full service restored by September.

Using federal stimulus funds, port officials have already rehabilitated several tunnels and performed required maintenance along the stretch of track. An additional $3.6 million in state funds approved last year are also being used to fund other portions of the track restoration. Additional repair work to signals and rehabilitation of at-grade crossings with street traffic will also need to be completed before the line reopens.

The port has requested $7.8 million in state lottery-backed transportation funds to complete refurbishment of the track. The port's application for funding has already received top marks from four state transportation committees.

The 23-mile stretch is actually the tail end of a 111-mile Coquille-to-Eugene stretch of track that the port already purchased from a beleaguered Central Oregon & Pacific Railroad after the railroad abandoned the line.

Tuesday, January 4, 2011

ATA Files Brief With Ninth Circuit in Los Angeles Truck Program Suit

The American Trucking Associations has filed its arguments with a federal appeals panel in the ongoing litigation over portions of the Port of Los Angeles clean truck program.

The ATA, which represents more than 37,000 trucking firms nationwide, first filed suit against the port in July 2008 arguing that portions of the clean truck program violate the Supremacy Clause of the U.S. Constitution and federal interstate commerce regulations.

In its filing with the Ninth Circuit Court of Appeals, the ATA reiterated its original arguments and asked the appellate panel to overturn a September 2010 lower court ruling that found while portions of the port truck program did violate federal law, the port was exempt from the federal regulations.

District Court Judge Christina Snyder based her September 15, 2010 ruling in favor of the port on the concept of market participation. Judge Snyder found that the port, through its truck program, is operating as a participant in the local port drayage market and not simply as a regulatory agency. As a market participant, said Judge Snyder, the port is exempt from the cited federal regulations under federal preemption guidelines.

In its filing with the Ninth Circuit, the ATA argued that Judge Snyder erroneously relied on the market participation concept and that because the port does not contract any drayage service, it is not a participant in the drayage industry and therefore not exempt from federal regulation. The ATA filing also casts the port in the role of a regulatory entity, not as a commercial participant in the drayage industry as Judge Snyder ruled.

Portions of the truck program had been enjoined by the lower court since the first days of the litigation and Judge Snyder agreed with an ATA motion in mid-September 2010 to reinstate the injunction while her ruling is under appeal to the Ninth Circuit. In her reinstatement ruling she said that while confident of her earlier ruling in favor of the truck program, 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 (along with neighboring 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 governmental 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.

The litigation has drawn national attention as a potential precedent setting case that could either reinforce federal supremacy over interstate trucking or set the stage for other ports to set their own local trucking regulations. Numerous ports across the nation are either in the process of implementing or developing trucking programs similar to the Los Angeles program.

The port is scheduled to file its brief with the appellate panel by January 31 and the optional ATA reply brief is due within 14 days after service of the port brief.
The Ninth Circuit stated that after the briefings are complete, the case "shall be calendared as soon as possible.”

Seattle Kicks Off Clean Truck Program, Bans Pre-1994 Trucks

In addition to kicking off a new decade, New Year's Day 2011 inaugurated the start of the Port of Seattle's clean truck program.

As of Jan. 1, only trucks with 1994 or newer engines are permitted to enter the Seattle port’s four main container facilities – Terminal 5, Terminal 18, Terminal 30 and Terminal 46. Older trucks with pre-1994 engines are banned from servicing those terminals.

In addition, under the truck program all port-servicing trucks entering those terminals must be registered with the port's Drayage Truck Registry and display a Green Gateway sticker on the driver's door certifying that the truck is compliant with new truck program regulations.

Part of the omnibus environmental plan known as the Northwest Ports Clean Air Strategy, the Seattle truck program has registered more than 4,000 trucks and 800 trucking firms since the registry was first implemented last year.

Pre-1994 model year trucks are eligible for participation in the year-old Scrappage and Retrofits for Air in Puget Sound, or ScRAPS, program. Funded by the port, the Puget Sound Clean Air Agency and the Washington State Department of Ecology, the program has scrapped more than 215 pre-1994 trucks.

The ScRAPS program offers truckers willing to scrap their pre-1994-engined trucks either $5,000 cash or the blue book value of their truck – whichever is greater. In addition to helping scrap older trucks, the program also offers drivers grant monies to retrofit 1994 and newer trucks with pollution control devices.

Drayage drivers who scrap their trucks also have the option of using their ScRAPS money to purchase a newer truck through loan assistance from Cascade Sierra Solutions, the contractor running the truck program; purchase their replacement truck from a third party; or, leave the drayage trucking industry altogether. To date, nearly 10 percent of the ScRAPS funding recipients have chosen to leave the industry.

The first phase of the ScRAPS program began with $1.5 million to pay for scrapping and just under $700,000 to pay for retrofits. A second phase, set to kick off later this year, has an additional $2.5 million for scrappage and retrofits.

The more stringent Southern California ports' Clean Trucks Program, implemented in October 2008, led to the trucking industry investing more than $650 million to upgrade the local drayage fleet to 2007 or newer models within two years. Almost 90 percent of all cargo moved by truck through the ports of Long Beach and Los Angeles is now being handled by 2007 or newer model year trucks. Officials from the Southern California ports claim that, as of Jan. 1, 2010, ports-servicing truck emissions have been reduced about 80 percent from baseline pollution levels recorded in 2005. In all, the Southern California truck programs have removed more than 8,000 older trucks from a local drayage fleet that numbered around 19,000 trucks prior to the truck program implementation. It is worth noting that the banned trucks were not removed from the road, simply banned from servicing the ports. Under the Southern California truck programs, very few of the older trucks were ever actually scrapped under the program.

DOT Signs Off on Final Funding for Colton Crossing Rail Project

The United States Department of Transportation has signed off on a $33.8 million federal stimulus grant which provides the final funding for the redevelopment of a highly congested freight rail crossing located about 65 miles east of the ports of Long Beach and Los Angeles.

The nearly $210 million Colton Crossing project seeks to separate an at-grade Inland Empire intersection of an east-west Union Pacific track and a north-south BNSF track. While mainly a freight route, public transit trains also utilize the BNSF track and Amtrak trains use the UP track.

More than 110 trains a day cross through the four-way rail track intersection and trains waiting to cross can sometimes sit idling for hours. Freight and transit rail officials, including the DOT, have identified the crossing as one of them most serious rail congestion points in the region – one with national impacts due to the slowing of freight from the Southern California ports. Approximately 60 percent of the freight rail traffic that moves through the crossing is Southern California port traffic.

The Colton Crossing project has generated several controversies, with local residents and the railroads differing on the how the project should eventually look and Inland Empire transportation officials, with their own ideas of where scarce state funds should be spent, initially balking at spending taxpayer funds to support what they viewed was essentially a private infrastructure project.

Local residents urged local officials to design the crossing so that at least one of the sets of tracks was sunk into a below-grade trench, thus minimizing impacts on surrounding areas. The railroads pushed for the cheaper option that would see a bridge built to carry one track over the other.

The current plan calls for the cheaper option, with a new flyover planned to lift the UP tracks above the BNSF tracks.

The $33.8 million DOT grant was originally approved in February 2010 as part of the American Recovery and Reinvestment Act stimulus funds through the Transportation Investment Generating Economic Recovery, or TIGER program. However, the signing of an implementing accord was delayed until last week due to negotiations between the various parties. In May 2010, the California Transportation Commission approved $91 million in funding from the voter approved California Proposition 1B Trade Corridor Improvement Fund. The two railroads will provide the remaining funding.

Cal United Officially Shutters Long Beach Terminal

California United Terminals, one of the keystone tenants at the Port of Long Beach, California for 30 years, officially shuttered its 130-acre Pier E facility over New Year's weekend.

CUT, a subsidiary of Hyundai Merchant Marine, is now operating out of 98 acres of land subleased from APM Terminals in the Port of Los Angeles. CUT began operations at the new facility in Los Angeles on December 5, 2010, just two weeks prior to the final vessel call at the Long Beach facility. The CUT terminal in Long Beach, which opened in 1979, was servicing calls mainly from Hyundai as well as carriers APL and MOL.

In August, 2010 CUT announced its intention to relocate to the Port of Los Angeles by the end of 2010. CUT officials said at the time that the Long Beach facility was no longer a good fit based on construction schedules, land configuration and berthing space limitations.

Port of Long Beach officials estimate that the departure of CUT will cost the port about 385,000 twenty-foot-equivalent units, or TEUs, a year – roughly 7.6 percent of the port's total TEUs handled in 2009. According to port officials, negotiations are under way with at least one current tenant at Long Beach to possibly backfill into at least some of the vacated CUT location.

"The timing of this departure allows us to entertain a variety of leasing opportunities that may ultimately result in a more effective use of this property," said Port of Long Beach Deputy Executive Director Chris Lytle last year.

Lytle said demand for terminal space in Long Beach remains high and that new cargo coming to Long Beach will quickly offset the loss of Hyundai’s trade volume.

"New vessels have or will shortly begin calling at the Port of Long Beach, with an additional 1 million or more TEUs a year," said Lytle in August. "At SSA’s Pier A facility alone, the recent addition of two services will result in an additional 550,000 TEUs. Matson’s new China service will add about 234,000 TEU a year."

Lytle also said at the time that the departure of CUT would not impact the Long Beach port's ongoing Middle Harbor Redevelopment Project, which is centered on the shuttered CUT location.

In August 2010, the Port of Los Angeles governing commission approved an amendment to their lease with APM Terminals Pacific that provides for a CUT sublease of APM property located on the Los Angeles port's Pier 400. The nearly 500-acre APM facility on Pier 400 is home to shipping giant Maersk.

Ironically, Maersk was also a defector from Long Beach, moving to the then-recently completed Pier 400 in the early 2000s and taking with it nearly a quarter of Long Beach's annual container traffic. Surprising most in the industry at the time, Long Beach port officials were able to make up the loss in about 18 months with new tenants and expanded operations by existing tenants.