Thursday, June 30, 2011

Opinion: Columbia & Willamette River Vortex

By David Dent

June 2011

Good Friday this year wasn’t really very good for the M/V Suzaki Wing. She reportedly lost power while steaming downstream, fully laden with logs, and managed to collide not only with the paper mill dock at Wauna, Oregon, but also with a Tidewater barge that happened to be alongside at the time. A regular trifecta of marine disasters.

Historically, vessels that suffer engine and/or steering mishaps while transiting the Columbia and Willamette Rivers will unerringly be drawn to targets of high value, or onto hard spots that result in the maximum damage to the vessel. To quote a friend, “They go for the shiny spots”.

In the early 80’s the M/V Ming Winter lost power while heading downstream above Rainier, Oregon, and while there were miles and miles of farmland and undeveloped river frontage on either side, she torpedoed the cooling water intake for the then-active Trojan Nuclear Plant.

Not long afterward, a regular caller, the tanker Mobiloil, lost steering while inbound with a full load of mixed petroleum products. Again, in spite of being in an area on the Columbia River that was mostly undeveloped and soft, she managed to hit the one good hard spot, Warrior Rock, at the downstream end of Sauvie Island. The result was thousands of tons of oil in the river, and the Mobiloil being declared a constructive total loss. Now we know why there is a lighthouse there.

In September 1999, the Turkish bulk carrier M/V Cenk Kaptanoglu, inbound with steel products, lost steering approaching the Kalama, Washington area and managed to miss all of the empty shoreline, but did manage to “t-bone” the relatively new North Kalama Cargo Dock. Another ship’s bridge with wide-eyed occupants, and one more disaster enhanced by some apparent targeting vortex that seems to vex our area.

Also in 1999, fully-loaded grain barge 61 veered off to port while inbound on the Willamette River, and, bypassing a lot of empty shoreline, she managed to crash through the downstream catwalk at the grain elevator at Terminal 5. This was a missed golden opportunity because the barge just barely scraped the stern of a ship at the berth.

Those of us who benefit from these disasters, including salvage companies, surveyors, ship repair yards, marine construction companies and the like, can only wonder at the bounty right here in our own backyard. Ship’s masters, pilots and ship owners probably have a different attitude. But, history makes it abundantly clear that one only has to wait awhile before the next contact is made. I wonder how the Port of Longview is coming along with their new grain terminal?

David Dent is a marine surveyor in Portland, Oregon.

Battle Over Long Beach Port Funds Continues

The ongoing enmity between Long Beach City Hall and the semi-autonomous city department that runs the Port of Long Beach continues, with a recent budget move by the port governing board raising the hackles of the city mayor.

On June 20, the four sitting members of the five-member Board of Harbor Commissioners gave final approval to the port's fiscal year 2012 budget.

Commissioner Mario Cordero recently resigned from the board to join the Federal Maritime Commission, leaving a vacant seat on the panel.

The $822 million port budget, according to port officials, "reflects the port’s strategy to boost its business activities by investing aggressively in environmental and capital improvement projects while keeping operating costs in check."

The port does not use tax dollars and operates on revenue mainly generated by docking fees charged to vessels and the leasing of port property to private interests.

Contained within the budget are projected expenditures of $59 million for pollution cutting shore-side electrical power for ships, $109 million for the Gerald Desmond Bridge Replacement Project and $231 million for the construction of the Middle Harbor Redevelopment Project.

In total, the capital improvement projects contained in the budget amount to about $630 million.

The port's FY2012 budget also cuts the non-personnel cost of port operations by 7 percent, following a 12 percent reduction in fiscal year 2011 and a 4 percent reduction in fiscal year 2010.

“We are seeing some signs that the global recession is easing and our revenues are beginning to recover,” Port Executive Director Richard Steinke said in a statement.

”We are investing in our future, while living within our means today. Our prudent fiscal management is what gives us the ability to invest and to stay competitive in our industry. We must continue to modernize and ‘green’ our operations,” Steinke said.

The port's FY2012 budget represents a 26-percent increase from FY2011, mainly as a result of an increase in capital spending.

However, it is what was not in the budget that drew the ire of Long Beach Mayor Bob Foster – namely no funds to cover the annual transfer of port funds to the city for FY2012.

Each year, under the City Charter, the city can request that 5 percent of the port's gross operating revenue to be transferred to the city's Tidelands Operating Fund.

The Tidelands transfer was devised as an emergency measure more than 15 years ago to help the financially strapped city. The city has requested the transfer, which has ranged from the low single-digit millions to more than $12 million, every year since and the port has never refused.

These transferred funds are controlled by City Hall but must be spent in the city tidelands areas on specific and well-defined maritime and maritime-related uses. The tidelands funds, by law, cannot be co-mingled with the city's general revenue funds.

Until a voter approved initiative passed last year, the amount of the transfer was set as 10 percent of the port's net revenue – basically the port's profit after excluding all expenditures.

The passage of the November, 2010, initiative – called Measure D – also shifted control of all oil revenue generated on port property to City Hall.

City Hall, at the time, repeatedly claimed that the new transfer formula within Measure D would only shift an additional $1 million to $1.5 million away from the port per year.

However, port financial staff, at the time, estimated that Measure D would shift more than $130 million from the port to City Hall over the next five years – $100 million in oil revenues and $33 million in added port-to-city annual transfers. This represents roughly 20 percent of the port's average net income per year.

Officials at City Hall said the added transfer funds were necessary because the Tidelands Operating Fund, which is used by the city to bankroll services and projects within the tidelands that would normally come out of the general fund, was projected to be broke by 2013.

On August 3, 2010, the final day for considering ballot measures for the November 2, 2010, ballot, the City Council approved Measure D for the ballot. The measure had been devised so quickly that at the August 3, 2010, council meeting, the city attorney was still tweaking the measure's language, only moments before the vote to place it on the ballot.

Not presented at the August 3, 2010, city council meeting was any study, report or analysis of how Measure D would impact the port. It was later learned that one was never done.

A study of Measure D by the California State Lands Commission – released shortly before the November, 2010, election – stated that state lands staff, despite numerous requests to Long Beach City Hall for such a fiscal impact study, report or analysis, was "unaware of any evidence that the City Council analyzed and considered any potential impacts to port operations when it voted to place [Measure D] on the November [2010] ballot."

Several port commissioners appeared at the August 3, 2010, City Council meeting and questioned the rapidity in which the measure was drafted. They asked the Mayor and City Council to slow down the ballot process and for the potential financial impact to the port to be studied.

Mayor Foster, the City Attorney, and several City Council members publicly dressed down both the commissioners for questioning the measure and the process bringing it to the ballot, saying the port was fostering an "us-versus-them" atmosphere between City Hall and the port.

Since then, tensions have smoldered off and on between City Hall and the port.

When Mayor Foster learned that the port had not included any amount in the port's FY2012 budget for the annual transfer of port gross operating revenue to the city, City Hall sources who declined to be identified said the mayor contacted port officials and expressed his anger about the exclusion of the estimated $17.4 million transfer (based on the port's FY2012 projected operating revenue).

For their part, the port commissioners said that they assumed the city would not be asking for the transfer in FY2012, as no request from City Hall had been made during the port's lengthy budget preparation process.

There is also little doubt that the port belief that no transfer would be sought was bolstered by the fact that the Tidelands Operating Fund, which was nearing insolvency prior to the passage of Measure D, is projected to reap nearly $100 million in port funds between November, 2010, and the end of FY2012, from both the new transfer formula and the added port oil revenues.

In a June 20 port board meeting agenda item bringing the FY2012 budget to a final commission vote, port staff said as much: "We have assumed that the city will continue to direct the port's oil revenue to the Tidelands Operating Fund and as a result the Tidelands Operating Fund will not need a Tidelands transfer."

The day after the port passed the FY2012 budget in committee on June 13, the city manager informed the port in writing that a formal request for the annual transfer from the port would be presented to the port in July. However, the port is required to pass its budget and forward it to City Hall no later than July 3. With no city request for the transfer in hand, the port passed the FY2012 budget, first in committee on June 13 and then in whole on June 20, without an allocation for the transfer.

Mayor Foster later told the local Grunion Gazette newspaper that it was not up to the port to determine if the city needed the transfer funds and that the only reason in the City Charter for the port to not make the transfer is if the transfer would represent an economic burden to the port.

The Mayor, who has line item veto power over city department budgets, also said that he and the City Council, who must also sign off on the port budget as a whole, would be asking a lot of questions about the port budget when it comes before them.

Last year, Mayor Foster vetoed a $300 million port budget item for the replacement of the port's more than 50-year-old and seismically unfit headquarters with a state-of-the-art "green" building. The port is now looking to relocate its headquarters to leased or purchased space near the port.

Port officials have said they will reconsider the inclusion of the transfer in the FY2012 budget if a formal request by City Hall is made.

Wise Elected Long Beach Port Board President

As part of the Port of Long Beach Board of Harbor Commissioner's annual election of board officers on June 27, Commissioner Susan Wise was elected President of the port commission by her fellow commissioners.

Wise, who was appointed to the five-seat commission in 2008, succeeds Commissioner Nick Sramek, who has served two one-year terms as President.

In her role as Commission President, Wise will serve as chair of the commission, run board meetings and serve as the public representative of the port, both to the public and the shipping industry.

Commissioner Thomas Fields, appointed to the port board in 2009, was selected by the commissioners as Vice President.

Commissioner Mike Walter, who has served on the Commission since 2005, was named Secretary.

Sramek, who joined the port board in 2007, will serve as Vice Secretary.

A fifth seat remains vacant following the resignation last month of Commissioner Mario Cordero, who is now serving in Washington, DC on the Federal Maritime Commission.
All of the new board officer positions take effect July 1.

As the governing body of the Port of Long Beach, the commission sets the financial and policy direction for the port. Commissioners are appointed by the Long Beach mayor and confirmed by the City Council. Commission terms last six years and an individual can serve a maximum of two terms.

Noted Economist Tapped for Los Angeles Port Board

Sung Won Sohn, a college professor who once served as an economic adviser to President Richard Nixon, has been tapped by Los Angeles Mayor Antonio Villaraigosa to fill a vacant seat on the Los Angeles Board of Harbor Commissioners.

A renowned Korean American economist, Sohn currently serves as the Smith Professor of Economics and Finance at California State University, Channel Islands. He is also vice chairman of retail clothing chain Forever 21 and is a member of the board of directors for Claremont Graduate University, Cryo-Cell International and Western Alliance Bancorporation.

From 2005 to 2007, Sohn served as president and CEO of Los Angeles-based Hanmi Financial Corp, the largest Korean American Bank in the United States.

He previously served as executive vice president and chief economist of Wells Fargo from 1998 to 2005. Sohn joined financial services firm Norwest in 1974 and served in various roles until the firm was purchased by Wells Fargo Bank in 1998.

During the Nixon administration, Sohn was a senior economist on the President's three-member Council of Economic Advisers, where he was responsible for economic and legislative matters pertaining to the Federal Reserve and financial markets.

"His decades of experience in banking, management and economic forecasting will help the Port of Los Angeles remain one of the economic anchors of our city," Villaraigosa said in a statement.

Sohn was recognized in 2007 by the Los Angeles Chamber of Commerce as "Executive of the Year." The Wall Street Journal in 2006 named Sohn as the most accurate economist in the United States. In 2002 he was named to the Time Magazine Board of Economists and in 2001 was named by Bloomberg News as one of the five most accurate economic forecasters in the United States.

Sohn, if confirmed by the Los Angeles City Council, will fill the port board seat vacated by Kaylynn Kim. Earlier this month, Kim resigned her position on the port board – after a tenure of six years – to spend more time with her family.

Los Angeles Signs Labor Deal Covering $1.5B in Port Projects

Los Angeles Mayor Antonio Villaraigosa signed a five-year labor agreement on Tuesday that will cover more than $1.5 billion in planned Port of Los Angeles construction projects.

Villaraigosa signed the agreement with the Los Angeles-Orange Counties Building and Construction Trades Council, which represents about 140,000 building trade members.

Approved by the port governing board in March and the City Council in May, the agreement sets guidelines on the types of workers that must be hired by contractors for all capital projects at the port. The terms cover about 95 percent of the port's projected capital projects outlays for the next five years.

"This project labor agreement gives thousands of our local workers in some of the most economically disadvantaged communities the jobs and job training opportunities they need to get back on their feet," Villaraigosa said.

The projected port projects are expected to require a total of more than 6,000 workers through 2016. Under the terms of the agreement struck with the trades council: 30 percent of the jobs must go to local port-area residents; 10 percent must go to "at-risk" workers, such as unemployed or workers with criminal records; and, at least 20 percent must go toward union apprentices.

The rest of the available positions will go to union workers.

Supporters have argued that such labor agreements assure union workers for projects while reducing work stoppages and strikes during construction.

Opponents of similar labor agreements have said they drive up costs and shut out small contractors who cannot afford to provide labor from outside their own firms.

Tuesday, June 28, 2011

Maersk Orders 10 Additional Megaships

Danish shipping giant A.P. Moller-Maersk on Monday announced it has placed a $1.85 billion order for 10 additional megaships from South Korean firm Daewoo Shipbuilding and Marine Engineering Co.

The 18,000-TEU vessels, known as Triple-E class vessels, were ordered under an option on a deal inked in February. Under the terms of the deal, Maersk placed an initial $1.9 billion order for 10 Triple-E vessels with an option for 20 more.

The first of 10 Triple-E vessels are set for delivery in 2013 and 2014. Monday's order of 10 additional vessels are set for delivery in 2014 and 2015. The remaining 10 Triple-E vessels under the option arrangement have not yet been converted to an order, but must be exercised no later than the end of 2011.

The 30-ship Maersk order, with options, is the largest ever received by Daewoo.

When completed, the Triple-E class vessels will be the largest container vessels afloat at 1,312 feet long and 194 feet wide. The vessel's official reported capacity of 18,000 TEUs is more than 2,500 TEUs larger than the current cargo vessel record holder.

The Triple-E vessels are expected to enter Maersk's lucrative Asia-Europe trade.

SoCal PierPass Fee Increase Delayed Until August

Terminal operators at the Southern California ports of Long Beach and Los Angeles on Monday said that they will delay the implementation of a $10-per-TEU increase on the PierPass Traffic Mitigation Fee (TMF) by about a month.

According to members of the West Coast Marine Terminal Operators Agreement, which formed PierPass six years ago, the delay "is in response to feedback from customers and other partners in the goods movement industry, and is intended to provide more time for cargo owners to prepare for the adjusted TMF."

Three weeks ago WCMTOA announced that effective July 4 it would increase the TMF from $50-per-TEU to $60-per-TEU, the group's first announced increase in the TMF since 2006.
The delay will now see the fee increase take effect on August 1.

PierPass is a not-for-profit company created by marine terminal operators at the ports of Los Angeles and Long Beach in 2005 to address multi-terminal issues such as congestion, security and air quality. Under PierPass, all international container terminals at the two Southern California ports established five new off-peak hour terminal gate shifts per week.

As an incentive to lure users into using the off-peak gates and to cover the labor costs of the added gate shifts, PierPass charges the TMF against most cargo movement during peak gate hours of 3 a.m. to 6 p.m., Monday through Friday. These collected peak-hour fees are then used to offset the costs of the off-peak gate shifts.

Currently, about 55 percent of all drayed container traffic moving in and out of Los Angeles and Long Beach terminals is handled during the off-peak gate shifts.

A lingering concern for the WCMTOA members is that the TMF has never fully covered the terminal operators' costs to run the extra gate shifts. According to WCMTOA members, the shortfall between TMF revenues and off-peak gate costs in 2010 was $52.3 million. Based on recent PierPass numbers, the additional $10-per-TEU TMF increase would only generate enough revenue to cover between 50 and 60 percent of the shortfall experienced in 2010.

MOL Orders New Vessels, Signs Charter Agreement for Others

Adding to the recent slew of box ship orders by major carriers, Tokyo-based ocean carrier Mitsui O.S.K. Lines announced Monday that it has ordered two 8,600-TEU container vessels from Japanese shipbuilder Mitsubishi Heavy Industries with delivery slated for 2013. The new vessels will join eight 8,100-TEU MOL vessels already in operation in the Asia-Europe routes.

MOL, which services all the major ports on the West Coast, also announced Monday that it had reached an agreement with Singapore-based Neptune Orient Lines Group for a three-year charter of five 14,000-TEU container vessels that NOL recently ordered. The five vessels in the agreement are set for delivery to MOL in 2013 and 2014. The chartered vessels will join five others operated by NOL-shipping arm APL on Asia-Europe routes.

“Expansion of the fleet will secure needed capacity on the East-West route, and allow us to provide high-quality, competitive services. MOL works continuously to further improve and optimize its service, and is reviewing the need for an expansion of the fleet on not only East-West trades but also all other routes for the benefit of our customers,” MOL Liner CEO Junichiro Ikeda said in a statement.

MOL is one of the largest shipping lines in the world and currently operates a fleet of just over 860 vessels.

Seattle Port Honors APL For Environmental Efforts

The 5,900-TEU container vessel APL Spain has become the latest milestone in a two-year-old environmental program at the Port of Seattle aimed at slashing ocean going vessel air emissions.

In a ceremony on June 28th, officials from the port recognized APL, the shipping arm of Singapore-based Neptune Orient Lines, for the carrier’s commitment to environmental protection and acknowledged the APL Spain as the 800th vessel to call at Seattle under the port's At-Berth Clean Fuels (ABC Fuels) program.

Implemented in 2009 as a means of addressing ocean-going vessel emissions, ABC Fuels requires vessels to switch to and burn low sulfur fuel while docked in Seattle.
"We are very pleased that our vessel is the port’s 800th At-Berth Clean Fuels vessel," APL Americas President Gene Seroka said at the ceremony.

"Under Tay Yoshitani's leadership, the Port of Seattle has made great strides in improving the quality of the environment for the residents of Seattle and the Puget Sound region. Reaching the 800th ship milestone is no small task and APL commends the port for its hard work and dedication.”

Speaking during the ceremony aboard the APL Spain bridge, Linda Styrk, Managing Seaport Director of the Port of Seattle said, “We want to acknowledge APL’s environmental leadership. APL voluntarily switched to low sulphur fuels at the Port of Seattle long before the ABC Fuels program was created. We count APL as one of the Port's key environmental partners, and thank APL for its long-standing partnership and unwavering commitment to reduce environmental impacts.”

APL’s Vice President for Environment Earl Agron said that the port's environmental focus meshes well with APL's commitment to the environment.

"The APL Spain's visit as the port's 800th ABC Fuels ship is tangible evidence of a program that is both robust and environmentally successful."

APL began its voluntary low sulfur fuel-switching program in Los Angeles and Seattle in 2007. The carrier has since extended the program to Hong Kong, New Jersey, New York and Vancouver. In April, APL became the first carrier calling at the Port of Singapore to switch to low-sulfur fuel.