Friday, April 12, 2013

Commerce Security from Offshore Port Design

By Hank Glauser 

During the next 20 years the maritime industry may undergo some profound changes, but what will they be? How will fuel prices affect operations and profitability? How will ports keep up with technology and increasing demand? Will security restrictions ramp up with a proliferation of nuclear capable states?

The issues facing the maritime industry seem daunting: Containerization of freight, transition of the international shipping fleet, Panama Canal expansion, new port facilities in Mexico and Canada, the litigious process and high costs of port improvements, labor relations, poor US port efficiency when compared to major Pacific Rim ports, threats of terrorism, landlocked ports vs. expansion pressures, invasive species threats and ballast water treatment requirements, environmental impacts and costs of dredging, the current state of inland commercial waterways, and transportation issues revolving around traffic, fuel efficiencies, fuel costs and pollution.

Each one is a serious issue that has generated much debate and investment. Taken together however, these issues have prompted the Lawrence Livermore National Laboratory to initiate the Portunus Project.

The Lawrence Livermore National Laboratory (LLNL), known for its role in national security research and technology development, recently presented the Portunus Project at the California Maritime Leadership Conference in February. It started with a brief lesson in history. The Cold War was won, in part, when the Soviet Union bankrupted itself trying to provide for its own security. Today, a terrorist can threaten the United States at relatively low cost. The cost of defending against these threats however, consumes vast amounts of public and private resources. To truly win the battle against terrorism, we must turn this economic reality around to convert vulnerability into strength.

The Portunus Project is a security research project that looks into various technologies and mechanisms to provide an offshore inspection of seaborne trade and private craft as one of many strategies to address the threat of terrorism. The offshore platforms vary in size based on the level of threat, from one small platform with one crane, to an entire offshore trans-shipment port complex. These platforms would be located about 20 miles offshore near major shipping lanes. They would be initially set up to inspect, but later to process shipping. The technology developed could be used for other industries such as aquaculture, desalinization, commercial real estate development and defense.

The initial design criteria for the offshore trans-shipment port complex is to simultaneously offload up to eight 18,000-TEU ships within 36 hours. This is achieved by using multiple-pick cranes, automated equipment, logistics management programs and state-of-the-art inspection technologies.

Why would anyone be interested in such a concept? Two reasons: economics and security. Let’s look at the business side first.

The most efficient way to move goods across the ocean is by ultra-large containerships (>15,000 TEU). This trend is evidenced by the transition of the international shipping fleet, and expansion projects in ports and key waterways across the globe. The larger ships have drafts of about 50 feet, limiting their access to only a few ports that can dredge and refit their port infrastructure (new cranes & berths).

Fortunately for the West Coast ports, goods coming from Asia are hampered by the bottleneck that is the Panama Canal. At an average rate of 30 moves per crane-hour, it takes about 4 days to offload a 15,000-TEU ship in Los Angeles/Long Beach. In most cases, intermodal rail connections from ports take containers to rail yards for recoupling and sorting for trains bound to different inland destinations. There is a one-day customs hold and usually a four-day freight hold. All this takes time, and time is money.

Enter in the Panama Canal expansion project. The American Association of Port Authorities (AAPA) estimates that public and private investment in US ports will exceed $46 billion between 2012 and 2017. When the Panama Canal opens, its expanded capability will accommodate a 12,500-TEU ship. East Coast ports have made significant investments to expand their capabilities and competitiveness based, in part, on this project and its expected impact at reaching the U.S. consumer more efficiently. West Coast ports have also made investments to keep their market share by improving harbor access, berth size and intermodal connectivity.

Domestically, the most efficient way to move goods is short-sea shipping. The target of most of the imported goods is the US consumer, 70 percent of whom are located east of the Mississippi River. If you look at a population density map of the United States and overlay it with a commercial waterways map, you would find an almost 1:1 correlation. In the simplest terms, it costs roughly 25 percent less to move goods by barge vs. rail, and 75 percent less to move goods by barge than by truck, so why not take advantage of these efficiencies and move goods as far as possible using the inland waterway system?

What if we had a different model of goods movement taking advantage of all these factors? For example, use trans-shipment ports offshore to allow access to the largest ships. Process their cargo in a third the time it takes now allowing them to return to sea that much quicker. Take their cargo and sort it for transfer to smaller coastal vessels that can move goods inland or through the canal efficiently. Vessels can also take a large amount of pre-sorted freight to major ports with good intermodal connections. This model is a hub and spoke distribution system where one stop on a platform of a large transoceanic vessel generates 2-4 smaller ships simultaneously moving toward other destinations.

In this model, ports don’t have to refit their cranes and docks to keep up with the ever-increasing size of transoceanic carriers. They also don’t have to dredge their harbors to maintain 50 feet of depth. US coastal areas are protected from invasive species. Finally, a buffer exists between those that want to do us harm and a means of protecting critical infrastructure is established.

This brings us to the other reason why anyone would be interested in offshore ports. At some point in the future, terrorists may acquire enough material of sufficient quality to make a nuclear weapon of mass destruction. Clearly as time goes forward, we have seen a proliferation in nuclear capable nation-states. The technology to make a crude WMD is available to terrorists. So is the means of delivery. The thing that is missing is the material itself. This material can be manufactured, stolen or provided. Self-preservation, or a strong response resulting in annihilation, may not be the deterrent to terrorists as it was to the participants of the Cold War.

Our ports are located on our borders, near large population centers and are critical to the economic viability of the United States. Pushing detection overseas has been problematic and detecting threats in our ports may not be early enough.

Utilizing the concept of an offshore trans-shipment port, all inbound traffic can be scanned with high throughput, high confidence detection. The screening protocol would be to look for human trafficking, radiation/nuclear threats, chemical and biological threats, then contraband. The screening protocol would be designed to keep pace with the large amount of freight throughput. Utilizing data warehousing and high speed computing, containerized freight scans can be matched up with electronic manifests and historical data to aid operators in assessing risks. This time can also be used for the customs hold.

Couple the offshore ports with a robust maritime domain awareness system and you have a means to assess risk, maintain traffic control beyond coastal zones, and intercept ships that try to avoid the system. Movement of goods around the screen is managed with cooperative agreements between Mexico and Canada and a redeployment of existing port screening technologies to land border crossings.

The potential for the concept is great, providing the economics work out or the security solution is required and implemented thoughtfully. Some of the other benefits are jobs for shipbuilding and repair, US Merchant Marine and port workers. Environmental benefits result from limited dredging, protection from invasive species, less fuel consumption, pollution and traffic. Infrastructure improvements may be realized from reduced highway maintenance to improved inland waterways.

US government revenues are expected to improve due to an estimated $2 billion dollars per year in tariff collections for the first year (everything is inspected and assessed accurately), and expenditures are redirected from overseas inspection of containerized freight to domestic spending.

Coastal population centers and critical infrastructure are protected. U.S. ports remain intact in the event of an attack and damage to the economy is minimized.

The bottom line is that our protection strategy doesn’t bankrupt the economy. It strengthens it. Goods are received faster.

Recognizing the reality that an offshore trans-shipment port will have major implications on the economy, LLNL invited teams from the graduate business schools of Northwestern University, Dartmouth and the University of California at Berkeley, to brief their preliminary analysis to a panel of U.S. Department of Homeland Security, U.S. Navy and business representatives. They made the case that an offshore port with expedited handling of cargo may be economically viable without significant cost increases overall to inbound goods. A small fee per container, redirected funds and increased revenue collections can recover the costs of capitalization.

The Project is not without its challenges, however. Technical issues aside for now, the key to the project is to not injure the US economy and to make the platforms economically viable. In short, without a compelling business case, there are other places to invest.

The cost of the platform and its development has to be weighed against risks and benefits. Each sector of the economy needs to be evaluated to determine impacts regionally and by industry. Exports are a concern because our principal exports of waste paper, scrap and agricultural products operate on relatively low margins. Any significant increases in cost could impact these sectors.

There are other significant factors. The Jones Act may play a role in who and how the ships traveling between the offshore port and US domestic ports are operated and in turn, how that affects overall costs.
Labor issues need to be evaluated. Who staffs the platforms at what levels?

Who will have jurisdiction over the platforms – the Department of Homeland Security, Department of Defense, Department of Commerce, or Department of Transportation? The platforms are located beyond the traditional 12 miles territorial limit but within the 200 nautical-mile Economic Zone. What will be the permitting and review requirements? Will it be a government owned – contractor operated facility or some other management structure? How will costs be recovered? How can public-private partnerships be leveraged for mutual benefit?

Can cooperative agreements between the United States and its neighbors to the north and south be worked out to the mutual benefit of all involved?

There are technical details to work out as well. Each location has different technical requirements. A floating platform may make more sense on the West Coast while a fixed platform may be better suited for the East Coast. Not all ports handle containers. How is bulk freight managed? How many operating days can we expect for each of the platforms? Will that time be enough to maintain the necessary throughput for goods movement and profitability?

These and many other questions need to be answered thoughtfully and thoroughly. This process takes time and resources. It is the Portunus Project’s goal to move through this minefield of issues very carefully, bringing to bear experts in every field to evaluate the project and determine if solutions are available and implementable.

The project starts with low investment where there is high risk. Initial work with engineering design uses computer models to evaluate different design configurations, dynamic stabilization for the constantly shifting loads, operating limits and safety before prototypes are developed. Then prototypes are built and tested to validate the modeling. At this point, the prototypes can be used for small-scale offshore industries like aquaculture, desalinization plants and offshore renewable energy.

In parallel to the technical feasibility work, an economics study will need to be initiated. This study will look at macro- and micro-economic effects, operating requirements, specific sector and regional impacts and a host of other issues. It is important that the technical feasibility work be integrated with the economics study to define operating limits, cost of capitalization, requirements and demands for Jones Act shipping, etc.
Lastly a legislative and political evaluation needs to be conducted to work our way through the legal and organizational issues that will arise.

Due to all these factors, the Portunus Project has a development cycle of 20 years depending on funding. Hopefully the threat of a terrorist WMD does not raise its head before then. In such a case, we may push through a different solution based on expediency vs. good planning and thoughtful implementation. That is why it is important to start looking toward the future now with small investments to look at preliminary designs and the business case.

Hank Glauser is a Navy veteran of Desert Storm who earned an undergraduate degree at San Jose State University and an MBA from the University of California at Berkeley. He developed the Portunus Project at LLNL while working under the Global Security Principal Directorate’s Counterterrorism Program.