And I’m pretty cynical about the whole picture that’s emerging.

From the first, the Corps of Engineers’ study here in Savannah predicted that the amount of cargo handled at the Georgia ports would increase at the same rate over the next 20 years whether we dredged the river more deeply or did not. The logic is pretty simple, if not intuitive: If we dredge, we’ll see fewer but larger ships; if we don’t dredge, we will see more but smaller ships.

The Corps’ economic study said that the Savannah Harbor Expansion Project (SHEP) would be worth the massive expenditure of tax money because the deeper harbor and larger ships would make shipping companies more efficient. The attendant private savings would then appear elsewhere in the economy.

Side note: so ironic to see opponents of the 2009 stimulus and opponents of infrastructure spending by local governments support this massive federal infrastructure project.

Another side note: there are significant environmental risks here, and all the risk is being assumed at the local level. Will the benefits be local? According to the Corps’ economic study, there’s no way to answer that question. Since the savings will directly accrue to the shipping companies, the benefits could appear at any point in the supply chain.

Another side note: even dredged to 47′, the Savannah River will still be more shallow than several other key East Coast ports.

Of course, Savannah isn’t the only port likely to some massive spending for expansion, dredging, etc.

As more shipping experts and economists have considered all the impacts of the Panama Canal expansion, the more questions they seem to be raising about the likely impacts.

There is a growing number of voices who think that we won’t see a major redrawing of commerce. West Coast ports, according to this reasoning, will probably remain the first option for Asian shippers.

From an interesting report yesterday on NPR, Eastern Ports Spend Billions, But Will New Ships Come? by Greg Allen:

ALLEN: Economically speaking, there’s little question that modernizing ports and improving infrastructure is a good investment. But there are some in the cargo and logistics industry who now question whether the Panama Canal expansion will be the game changer that [Fla. Governor Rick] Scott, other public officials and port executives say it is.

ED SANDS: The fact is, they didn’t build it big enough.

ALLEN: Ed Sands is with Procurian. He spent decades in the logistics business, essentially helping companies move goods from point A to point B. The global recession brought big changes to the shipping industry. Sands says carriers are moving to a new class of mega-cargo ship – ships too large to go through the expanded Panama Canal.

SANDS: Technology and the developments in ship design and the massive chase for efficiency on behalf of the ocean carriers has rendered the canal expansion – I wouldn’t want to say it’s sort of a dud, but it’s not nearly as valuable had it been enlarged another 30 or 40 percent.

There are obviously more optimistic voices in the piece, but all have skin in the game, of one sort or another. Worth a listen:

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.

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.

But it’s hard for anyone here in Savannah — at least anyone who is serious about empirical data that might impact projections for Georgia ports business with or without a deeper channel — to read the piece and not wonder about unforeseen consequences.

From the article:

The worldâ€s container lines canâ€t raise freight rates fast enough to cover soaring fuel prices as persistent overcapacity works against the industry.

Hapag-Lloyd AG, Europeâ€s fourth-biggest container company, said Aug. 14 that further increases are “crucial” if itâ€s to offset rising bunker costs — the price of fuel used on ships — and generate an operating profit this year. Still, a lack of demand forced the Hamburg-based carrier to delay a rate increase this month on routes between east Asia and northern Europe and cut a planned peak-season charge by more than half.[. . .]

“Weak fundamentals are making successful rate-restoration programs harder to implement,” Richard Ward, an analyst with ICAP, said in an e-mailed reply to questions. “Carriers are facing a struggling battle, as cargo volumes will drop off and capacity wonâ€t be adjusted quickly enough.”

With so many East Coast ports rushing headlong to expand capacity and with such uncertainties in global trade, I’m left wondering if the complex economic analysis of the Savannah Harbor Expansion Project by the Corps of Engineers adequately took into account various scenarios that might have seemed unlikely a few years ago.