With the widened Panama Canal likely to open the way for much larger ships around 2015, it’s clear that most East Coast U.S. ports will not even be able to accommodate some very large ships. And it’s becoming less clear by the day precisely what will happen from there.

The Corps of Engineers’ economic analysis of the Savannah Harbor Expansion Project, which would deepen the Savannah River to 47′ from 42′, found that the amount of cargo coming into the port would increase by the same rate for the next couple of decades no matter whether the river was deepened or not. The deeper channel would result in some dramatic cost savings, however — those savings would boost the economy in a variety of ways.

But many simply don’t believe that the Savannah port would see as much cargo if the river isn’t dredged. If those people are right, then it seems increasingly likely that the approved 47′ depth will be nowhere near deep enough for the Georgia ports to compete with deeper channels that are closer to the open ocean.

If you’re into wonky stuff like this, I highly recommend this post at DredgingToday.com: Dredging – Key Factor for US Container Port Call Strategies. From that piece:

Where the maritime community seems to have reached a fair consensus is on the size of the ships that will be deployed on All-Water Asia/US East Coast (USEC) through Panama (AWP) services. Once the widened Canal opens, ship sizes are anticipated to increase quickly from the current average 4,500 TEU up to around 8,000 TEU – similar to the size of ships presently deployed on All-Water Suez (AWS) services. There is also general agreement that despite the considerable increase in ship size and the respective reduction in shipping costs, the AWP route is likely to see only a modest increase in market share relative to its main rivals, the AWS and the US West Coast (USWC) landbridge.

Where opinions start to diverge more sharply is on the impact of Canal expansion on carriers†North American service patterns and, especially, whether the present approach based mainly on direct port calls will be replaced, at least in part, by a hub and spoke system. […]

But, the locks of the expanded Panama Canal are designed for New-Panamax (NPX) ships, which are forecast to initially have capacity of 13,500 TEU and eventually 15,000 TEU. Following worldwide trends, it is quite likely that NPX will be deployed on AWP as well as on AWS services within 5 years or so following the expansion. Interestingly, this possibility was considered unlikely in channel-deepening studies undertaken by the US Army Corps of Engineers, the Federal agency in charge of US ports†channels. Accordingly, the design ship for these channels is just 8,000 TEU! The Corps also dismissed the possibility that in the longer term, ships bigger than NPX, such as the 18,000 TEU Maersk Triple-Es recently deployed on the Asia-Europe trade, could be used on AWS services; and that in the even longer future ship size may reach the 28,000 TEU Malacca-Max (MLX).

It is not unfeasible that that introduction of ships too large for USEC ports†newly-dredged channels will trigger a change in the service pattern of both AWP and AWS to hub and spoke. In this case, USEC ports would find themselves served by feeder services based on foreign hubs in the Caribbean region for AWP and Canada for AWS. This change in service pattern could be avoided by further deepening of USEC ports†channels. However, considering the arduous process of the recent deepening projects, the prospects for this happening look pretty dim.

Mark Szakonyi, an associate editor with the Journal of Commerce and former Business Journal logistics reporter, […] spoke Monday to Jacksonville’s Council of Supply Chain Management Professionals on the state of the logistics/transportation industry. One topic he covered was how the canal widening will affect the East Coast. Not all analysts believe ports will miss out on a bonanza of trade if their shipping channels arenâ€t deepened by 2015, he said.

Some believe the cargo that would transition from West Coast ports to the East Coast has already come. If thereâ€s any more to come, it will be in the low single digits.

The piece cites an interesting data point I had not seen:

And some analysts are saying an all-water route through the Panama Canal may only save about $100 per load for the whole supply chain cost.

That means, assuming the new fees for using the widened Panama Canal do not increase dramatically, that there would certainly be cost savings for shippers who would like to switch from using the West Coast to the East, but that those savings would be limited and might be offset by the extra time that ships require. Most goods could be unloaded at West Coast ports, put on eastbound trains, and arrive at their final destinations days sooner than goods that are shipped all the way the East Coast through the widened canal.

In writing about the issue of the expensive and environmentally tricky Savannah Harbor Expansion Project, I’ve regularly noted that the Corps of Engineers’ economic projections that predict growth in the number of containers handled at the Georgia ports will increase at the same rate whether the Savannah River is dredged or not.

The piece cited here is yet more reason to think that many dredging proponents have overstated the importance of deepening East Coast ports and overstated the negative effects on those East Coast harbors that are not deepened.

The study has been completed by BEA Architects, which designs such facilities, so of course the document will argue for the viability of at least one site.

I’d love to have to eat my words on that last sentence, but, really, give me a break. Click here for more on the study.

But the question that we need to be asking before we waste any more public money and civic time debating this issue isn’t about the viability of the waterfront.

We need to be talking now to the folks at the Georgia Ports Authority, the Army Corps of Engineers, and the Coast Guard (I guess they’d be the right people) about the viability of cruise ships in the same long channel that will carry an increasing amount of cargo traffic for the foreseeable future.

In fact, we’re on the verge of spending $700 million of public money on a massive economic stimulus project to increase the efficiency of private shipping companies that use the Savannah River. The deeper channel will allow larger ships and more heavily laden ships. Some vessels will no longer have to wait for higher tides before coming in from the sea.

We also have liquified natural gas (LNG) tankers that come routinely to the facility at Elba Island, and the frequency of those trips seems likely to increase too. As I understand it, river traffic is completely shut down when those tankers are in use.

So how are all these commercial interests going to react when they find out that cruise ships on relatively tight schedules have to use the Savannah River at specific times?

It seems sort of ridiculous to spend $700 million in large measure to speed up freight traffic and then turn around and lure cruise ships that seem likely to dramatically slow that traffic.

So before we get too deep into all this, it’s time for the folks at the Georgia Ports Authority to get involved in the discussion.

But I have a new post up right now: Despite significant infrastructure spending in Obamaâ€s proposed budget, only a pittance for Savannah port expansion

This is a very interesting development, and it leaves the Republican-dominated Georgia congressional delegation with the tricky task of coming up with over $400 million in federal funding.

From Expanded Panama Canal sparks race to be ready for bigger cargo ships:

This is a story about big, and how one of the biggest construction projects in the world, the remaking of the Panama Canal, will let bigger boats sail into deeper harbors, where authorities are spending billions dredging channels, blasting tunnels and buying cranes from China the size of 14-story buildings to accommodate super-sized cargo.

All this might knock a couple of dollars off the price of a smartphone shipped from Shanghai — or alleviate poverty in Panama, where the government plans to make a fortune in tolls — or create a windfall for the ports ready to receive the big ships, such as those in Baltimore and Norfolk.

Or not. Nobodyâ€s sure, because no expert can predict with any certainty how the web of global trade routes will be redrawn, and who the winners and losers might be.

Key takeaways:

1. Despite various economic projections, no one can be certain what the trade impacts of the Panama Canal expansion will be.

4. The cost of dredging Savannah’s port, the depth limitations (at 47′, a newly dredged port of Savannah would still be shallower than several other East Coast ports — a detail not actually mentioned in the piece), and the sheer length of the Savannah River channel clearly hurt the port’s competitiveness.

The federal agency seeking to deepen the Savannah harbor sent letters to Vice President Joe Biden, House Speaker John Boehner and eight other Washington lawmakers saying the $652 million project should be allowed to bypass environmental review by South Carolina, which shares the Savannah River with Georgia.

The letters from the Army Corps of Engineers were disclosed in filings Thursday in U.S. District Court. The Corps wants to deepen more than 30 miles of the river from 42 feet to 47 feet to give supersized cargo ships room to reach the Port of Savannah.

The federal government gave final approval to the project in October and the Corps wants to begin construction in 2013. However, the federal Clean Water Act typically requires environmental permits from affected states.

Georgia granted one last year, but efforts to obtain approval in South Carolina are tied up in state and federal courts. In some cases, the law allows the Corps to bypass state permitting for projects specifically authorized by Congress that have undergone appropriate environmental studies.

This is certainly an interesting development, on multiple levels.

The Corps must view South Carolina’s objections to the project and/or various environmental lawsuits as strong enough to delay the dredging project for a significant period of time.

By going directly to key members of Congress, the Corps has potentially opened a can of worms. Not only will groups like the Southern Environmental Law Center know whom to lobby, but members of Congress would seem likely to engage directly — and behind the scenes — with the South Carolina delegation before pushing for strong action.

Consider the following editorial from the Charleston Post & Courier on Monday: Corps of Engineers should follow the law on Savannah River dredging proposal. An excerpt:

The Clean Water Act has presented some problems for the U.S. Army Corps of Engineers in its quest to deepen the Savannah River. So instead of addressing the problems, the Corps wants permission to ignore it.

Thatâ€s not the way it works, and the state congressional delegation should make certain it doesnâ€t happen.

The law dictates that the Corps cannot move forward with the Savannah dredging project unless South Carolina agrees it will not harm water quality. Thatâ€s reasonable. South Carolina and Georgia both border the Savannah River, and both should have a say in what goes on there.

I’m assuming that the South Carolina Congressional delegation will put a stop to any attempts to circumvent the process that gives individual states a say in decisions like this. Given the high cost of the dredging project — $652 million — it will be easy for spending-conscious Republican lawmakers to take a wait and see approach.

Many South Carolinians have objected to the dredging plans. Those objections generally fit into one of three categories:
1) Those who think a deeper Savannah port will hurt business for Charleston’s port.
2) Those who fear that a depth of only 47′ will make it impossible to build the long-proposed Jasper Port, which some think would need a depth of 50′ to be viable.
3) Those who see the considerable environmental costs and uncertainties as genuinely dangerous to South Carolina’s interests.

From S.C. high court overturns harbor deepening OK:

The state Department of Health and Environmental Control violated state law in approving a water quality permit for the $650 million deepening of the Savannah River shipping channel, the South Carolina Supreme Court ruled Friday.

The justices agreed with environmental groups that had sued, arguing that the South Carolina Maritime Commission, not the environmental agency, has the authority to decide matters involving the river. The required state certification under the federal Clean Water Act has been the subject of a year of political debate in South Carolina. […]

The justices wrote that the plain language of state law gives the Maritime Commission “the responsibility and exclusive authority to represent South Carolina in all matters pertaining to or collaterally related to dredging in the Savannah River.”

It’s widely considered in S.C. political circles that Governor Haley stacked the deck at the DHEC to approve the permit in the first place.

The Army Corps of Engineers is trying to move ahead with the project without South Carolina approval.

Assistant Secretary of the Army (Civil Works) Jo-Ellen Darcy signed the Record of Decision for the Savannah Harbor Expansion Project, known as SHEP, Oct. 26. The Record of Decision confirms that the proposed plan for Savannah Harbor channel improvements, including the associated mitigation, is in the national interest and meets the requirements of the National Environmental Policy Act.

There’s a whole lot more at the link.

This decision was long-expected, but there are plenty of questions remaining, especially the disposition of current or future lawsuits, the possible impediments to the project that might yet be laid by South Carolina officials, the question of who will pay for this, and so forth.

As I have noted repeated, many supporters have made job creation claims that aren’t supported by the evidence and engaged in apocalyptic rhetoric about a decline in container traffic if we don’t dredge the Savannah River an additional five feet, from 42′ to 47′. The Corps of Engineers’ economic analysis flatly contradicts those claims. (Click here for a list of posts on this blog discussing those issues.)

You’ll be reading a lot more about this in the coming days.