What’s the best way to fund those dredging projects?

Those questions are not answered in a new report by the Corps of Engineers, which was mandated 6 months ago by Congress to study the issue.

From Dan Chapman at the AJC, Federal study: Southern ports need money to deepen:

Savannah and other southern ports have “the most critical” need for money to deepen harbors for super-sized cargo ships expected to ply the world’s oceans by late 2014, according to a federal maritime agency report released Thursday.

But the study, done for Congress by the research arm of the Army Corps of Engineers, doesn’t conclude which ports deserve federal dollars to handle the huge container ships. Nor did the Institute of Water Resources say where the money should come from — the federal government, states, port authorities or shipping lines.[. . .]

U.S. Sen. Lindsey Graham (R-S.C.) asked the Corps six months ago to help determine which ports should get federal deepening dollars. [. . .]

Graham’s request followed Congress’ public disavowal of earmarks, the legislative practice of financing pet projects outside the full appropriations process. Graham, who couldn’t be reached Thursday, enlisted the Corps to help lay the groundwork for a national port strategy that would pick winners and losers.

As I noted in a recent post, there’s another interesting issue that has gotten little attention, although it figures quite prominent in the full Corps study released yesterday. Some port executives are expecting a significant increase in transshipment — the moving of cargo from larger vessels to smaller ones — after the Panama Canal is widened.

From that new study, eight — yes, eight — significantly different scenarios:

Scenario One – Under this scenario significant traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are high, either at postPanamax ready U.S. ports or Caribbean ports. The impact on agricultural exports is also high resulting in more grain being exported through U.S. Gulf ports.

Scenario Two – Under this scenario significant traffic is diverted from the West Coast ports andthe intermodal land bridge to the East Coast ports. Transshipments are high, either at postPanamax ready U.S. ports or Caribbean ports. The impact on agricultural exports is low with little impact on grain being exported through U.S. Gulf ports.

Scenario Three – Under this scenario significant traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are low, large vessels use post-Panamax ready U.S. ports but other ports are served by smaller vessels. The impact on agricultural exports is also high resulting in more grain being exported through U.S. Gulf ports.

Scenario Four – Under this scenario significant traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are low, large vessels use post-Panamax ready U.S. ports but other ports are served by smaller vessels. The impact on agricultural exports is low with little impact on grain being exported through U.S. Gulf ports.

Scenario Five – Under this scenario little traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are high, either at postPanamax ready U.S. ports or Caribbean ports. The impact on agricultural exports is also high resulting in more grain being exported through U.S. Gulf ports.

Scenario Six – Under this scenario little traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are low, large vessels use postPanamax ready U.S. ports but other ports are served by smaller vessels. The impact on agricultural exports is also high resulting in more grain being exported through U.S. Gulf ports.

Scenario Seven – Under this scenario little traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are low, large vessels use postPanamax ready U.S. ports but other ports are served by smaller vessels. The impact on agricultural exports is low with little impact on grain being exported through U.S. Gulf ports.

Scenario Eight – Under this scenario little traffic is diverted from the West Coast ports and the intermodal land bridge to the East Coast ports. Transshipments are high, either at postPanamax ready U.S. ports or Caribbean ports. The impact on agricultural exports is low with little impact on grain being exported through U.S. Gulf ports.

And if you’re still with me, here are two absolutely vital paragraphs, with emphasis added:

Over time the uncertainties with the market response to the Panama Canal improvements will be reduced as experience replaces expectation. IWR does not consider transshipment hubs likely to serve as the primary avenue of foreign imports or exports. As shown in Figure 33, the all-water route to the East Coast already adds 8 to 12 days to delivery. The Panama Canal toll will take a part of the transportation cost savings. A transshipment hub would add more cost and further increase delivery time. As noted in Chapter 2, the railroads are investing heavily, which will help maintain their competitiveness. These factors seem to weigh against the development of any substantial transshipment hub. In the absence of transshipment centers, post-Panamax vessels will call at the ports that are able to accommodate them, and the number of times that they call at each of these ports, their sailing drafts and other dimensions will become known.

However, this kind of a hub and spoke model has reduced airline passenger costs and air freight costs, so the option may be deserving of more analysis. Overall, it could be more economical for some routes and would involve less Federal spending and fewer adverse environmental impacts. The potential barriers include the cost to alter port facilities to accommodate transshipment, additional cargo handling costs, higher shipping costs due to cabotage, and the harbor maintenance tax.

As I’ve noted in previous posts, there’s still ample controversy about a depth of either 47 or 48 feet, since some rival East Coast ports are now or eventually will be deeper, in addition to being closer to the open ocean.

The pieces today by Mary Carr Mayle and Mary Landers cover history, the environment, cost issues, water quality concerns, fish habitat impacts, and a host of other issues. There’s also an excellent and long list of reactions by various stakeholders to the Corps of Engineers’ final report.

These two reactions were juxtaposed, which neatly capture some of the economic promise some see and the logistical challenges that others see (and which nearly $300 million will be spent to mitigate:

“The Savannah Port is critical infrastructure as we work to attract new business investment and jobs to the South Carolina lowcountry. Being prepared to accommodate post Panamax ships in Savannah is a job-creation game changer for this region.” – Kim Statler, Executive Director, South Carolina LowCountry Economic Alliance

“Thereâ€s no other port (for mega ships) like Savannah where theyâ€ve developed a long circuitous river route to get up to the port, not in the last 200 years. In fact, three of the biggest ports in world — Shanghai, Rotterdam and Haiphong — had river ports and when they realized they had to cater to big ships they built new ports on the ocean.” – Steve Willis, president of the board for the Center for A Sustainable Coast and chair of the Sierra Club Coastal Group.

I obviously have a few other recent posts dealing with this issue as well.

Critically — or perhaps not so critically — the Corps approved a dredging to 47 feet (from 42 currently) as being in the best economic interest for the nation. But Georgia officials wanted a depth of 48 feet. Meanwhile, growing objections from South Carolina have argued that the depth should be at least 50 feet at least as far as the proposed Jasper port along the Savannah River closer to the open ocean than the existing port.

At either 47 or 48 feet, the Savannah River would still have less depth than a handful of other rival ports on the East Coast.

From Corps cuts Savannah port deepening by a foot by Dan Chapman in the AJC:

Federal officials concluded Wednesday that the Savannah River should be deepened by a foot less than previously planned, a change that could limit gains in the portâ€s ability to handle bigger ships in the future.

In a much-anticipated report, the U.S. Army Corps of Engineers said itâ€s more cost-effective to deepen to 47 feet instead of the long-proposed 48 feet to handle ever-larger cargo ships that may soon ply East Coast waters.

State and metro Atlanta officials are pushing hard for the deepening due to the portâ€s importance to the regional economy. Nearly 100,000 jobs in metro Atlanta are directly tied to the distribution of goods that come through Georgia ports. However, a recent examination by The Atlanta Journal-Constitution questioned the supposed job and economic benefits of a deepened port of Savannah.

I have links to the AJC’s Port Wars series here, here, and here.

And the impact of that one foot on actual commerce. From the AJC piece today:

Rick Wen, a vice president with Hong Kong-based OOCL , a top 10 shipping company, said the 1-foot difference could translate to 800 containers per ship. Importers wonâ€t likely shy away from Savannahâ€s shallower depth, Wen said, because in-bound cargo is generally light weight and doesnâ€t need as much leeway. But exporters who ship heavy Georgia kaolin, timber and machinery “will definitely be affected,” he added.

The AJC piece also notes the high cost of environmental mitigation. It’s well worth a read.

The Charleston Post and Courier has also focused on that one foot: Corps calls for 47-foot-deep Savannah River to serve GA port

From that quite short piece (which could be expanded later, of course):

South Carolina State Ports Authority officials have repeatedly said that a depth of 47 feet would be insufficient for the planned multi-billion-dollar Jasper Ocean Terminal, and that a depth of 50 feet would be necessary. The Jasper terminal would be closer to the ocean than the Port of Savannah.

There’s sure to be much discussion about that final decision of 47 feet — that’s less than the 48 feet long-discussed and would seem on its face to raise even more questions given concerns that harbors of the future should ideally be 50 feet.

UPDATE: And a summary of the key findings:

Recommended improvements include: channel deepening from the sea through the harbor Entrance Channel to the Garden City Terminal to an authorized depth of -47 feet; channel widening to create meeting areas at Long Island and Oglethorpe Ranges; widening and deepening of the Kings Island Turning Basin; and channel widening at three bends. Recommended mitigation features include: preservation of 2,245 acres of freshwater wetlands; restoration of 28 acres of brackish marsh; construction of a fish bypass around the New Savannah Bluff Lock and Dam near Augusta, Georgia; installation, operation, and maintenance of oxygen injection systems at three locations in the lower Savannah River; construction of boat ramp on Hutchinson Island; construction of a raw water impoundment for water withdrawn from Abercorn Creek by the City of Savannah; and data recovery, removal and conservation of the remains of the CSS Georgia.

FULL TEXT OF PRESS RELEASE:

The final report—consisting of a General Re-evaluation Report (GRR) and an Environmental Impact Statement (EIS)—concludes that deepening the harbor from its current depth of 42 feet to 47 feet is economically viable, environmentally sustainable, and in the best interests of the United States.

“Todayâ€s release culminates 14 years of intense study, analysis, and coordination with state and federal agencies, stakeholders and the general public,” said Col. Jeff M. Hall, Commander of the Savannah District. “The cooperating agencies have unanimously agreed to the release of the final report.”

The following agencies served as Cooperating Agencies in preparing the final report: Environmental Protection Agency – Region IV; National Oceanic and Atmospheric Administration (NOAA) Fisheries Service – Southeast Region; US Fish and Wildlife Service – Southeast Region; and the Georgia Ports Authority.

“The Final Report represents the most comprehensive study for harbor deepening in the nationâ€s history,” Hall said. “We are confident that our report is thorough and strong, and that the project will enhance the nationâ€s global competitiveness while sustaining the natural environment.” The final report recommends the 47-foot plan, which is also the “National Economic Development” Plan. Signing of the Record of Decision—the final step in the process before construction can begin—is anticipated in late 2012. The GRR-EIS study, authorized by Congress, reflects an extensive analysis of the engineering alternatives, environmental impacts, and economic costs and benefits of deepening the Savannah Harbor and shipping channel. Funded by the federal government and the state of Georgia, the study examined the characteristics of future international shipping fleets, current and future trade routes, and the capacity of the Garden City Terminal on the Savannah River. Based on analyses within the report, the 47-foot plan would bring $174 million in annual net benefits to the nation, with a cost-to-benefit ratio of 5.5 to 1. Essentially, for every $1 invested in the project, the nation would yield nearly $6 in returns. The estimated total cost for the project, based on fiscal year 2012 levels, is $652 million, cost-shared by the Federal government and the State of Georgia.

Of the total cost, 45 percent accounts for environmental mitigation features at $292 million. Environmental features include flow-rerouting for marsh restoration, a fish bypass upstream near Augusta for the endangered Shortnose Sturgeon, a dissolved oxygen injection system, recovery of the ironclad CSS Georgia, a 10-year post-construction monitoring period, and more.

The public can view the report online at http://www.sas.usace.army.mil/shexpan/Home.html . Comments can be submitted in writing to: Headquarters, US Army Corps of Engineers, CECW-P (SA), 7701 Telegraph Road, Alexandria, VA 22315-3860. The official closing date for the receipt of comments is May 20, which is 30 calendar days from the date the notice of availability appears in the Federal Register.

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About Us: The U.S. Army Corps of Engineers†Savannah District manages three lakes and hydroelectric dams along the Savannah River. It also oversees a multi-billion dollar military construction program at 11 Army and Air Force installations in Georgia and North Carolina. Corps†projects range from barracks, hospitals and clinics to maintenance facilities, headquarters buildings and aircraft hangars. The Savannah District also has oversight and maintains additional civil works projects – from the Savannah and Brunswick harbors to the Atlantic Intracoastal Waterway.

Despite myriad doubts raised in that 3-part series about the economic benefits, the Savannah River’s depth after dredging, and the environmental impacts (which deserved far more play than they got in the otherwise excellent series), the AJC editorial page came to this conclusion: Port Wars: Georgia canâ€t afford not to fight for port funding.

From that editorial:

More to the point, in the absence of a national strategy governing how Washington divvies up taxpayer dollars to pay for work on U.S. ports, Georgia has no rational choice but to keep rowing toward full funding of the $650 million deepening project to keep Savannah competitive. Itâ€s every state, and port, for itself until this nation gets better metrics to judge competing projects.

The editorial, written by Andre Jackson for the board, justifies this opinion by citing all of the known — and current — economic impacts of the Georgia ports. None of which would be jeopardized without dredging, according to the Corps of Engineers.

Based on the evidence, the AJC’s editorial is not a very rational one.

Today, the Charleston Post and Courier editorial board has weighed in on the AJC series. From Savannah’s dredging gamble:

The rival port of Charleston wants to deepen its shipping channel to 50 feet at a cost of $300 million-$350 million. In terms of price and environmental impact, it is clearly a better option than the Savannah project.

But in the absence of a national port development plan, it wonâ€t necessarily make a difference. Sen. Lindsey Graham, R-S.C., has endorsed such a comprehensive review proposal. Altogether, 10 ports on the East and Gulf coasts are planning similar projects.

Nevertheless, the details cited in AJC reporter Dan Chapmanâ€s series appear to bolster Charlestonâ€s case.

For example, the Corps of Engineers has predicted “no additional cargo volume through Savannah Harbor as a result of the proposed harbor deepening.”

This is in contrast to Georgia Gov. Nathan Dealâ€s prediction of “much more cargo coming in.”

I noted that same discrepancy between Governor Deal’s beliefs and the official projections.