Saturday, June 14, 2008

Transportation LIT

The Prosperity Partnership toured the logistics and international trade (LIT) industry beginning the morning at the Port of Tacoma after an orientation/walk-thru at the REI distribution center in Pierce County.

The Prosperity Partnership was conducting the second of its annual quarterly orientation for civic and community leaders. This session focused on one of the region's targeted market clusters: Trade and Logistics. Greeted by PoT Commissioner Dick Marzano, who began by telling all what we already know: the economy and the PoT business are down. But he quickly followed with what we don't know: the weaker U.S. dollar has lead to the highest export volumes ever right now. The question for everyone is: Where have the containers gone? (We wonder what are the implications for Washington's high value agricultural exports? Or even more so, the many lower-value agricultural products that have taken advantage of the bargain-basement container rates available when so many were being shipped empty?)

Marzano let everyone on the tour know that the PoT entered the late '80s transshipping about 1.4M TEUs. The Port now has the capacity to ship 4M, and the potential to ship 15M TEUs. He notes that rail capacity is needed, especially when regional expectations for growth are factored into projections as this region's ports are "discretionary," meaning 70% of the cargo into here leaves for other destinations and can thus be shipped thru any available port.

Terry Finn, Government Affairs manager for BNSF said the PNW transcontinental line is the 6th most important in terms of container volume, he said. Noting that one railroad serving the Pacific Northwest (PNW) (Union Pacific being the other in the U.S., but also noting 2 Canadian railways that serve Western Canadian ports), has 1,500 miles of track in Washington. At present, he said, there are only small segments of Puget Sound's rail lines that have a Level of Service of "E", meaning they are significantly congested. Finn shared that Stampede Pass, restricted from carrying double-stack containers due to the low crown of the tunnel, carries an average 6 trains per day, while the Columbia River route carries 34-35 per day. A fairly recent state study said the Class 1 railroads need $39 billion capital investment by 2035, short $13.5 billion. There is an internal competition for all projects within the railroad for capital.

Tour participants piled back on the bus for what tour guide Tim Farrell, Executive Director, PoT called the "surge pile" -- his speak for the process of unloading ships before loading trains. Farrell went on to explain that it was faster to unload ships than to load trains, plus it was more expensive to have ships remain idle, all of which determined the work order. A few interesting points Farrell made:

  • A typical Panamax ship like the K Line vessel then unloading at the PoT will fill 5-6 trains with its cargo of containers.

  • Ships are very fuel efficient, moving 1 T of cargo 1,600 miles on 1 gal. of fuel

  • The grain terminal at the PoT holds a comparable volume equal to 1 ship. It takes 5-6 trains to fill the terminal and 3-5 days to load the ship. (One vessel was at the terminal and one was anchored in Commencement Bay at the time.)

  • Only low-sulfur fuel was available at the local truck stop such was the demand and the implications for environmental accountability.

Although this wasn't the chronological order of the day, Port of Seattle CEO Tay Yoshitani presented his staff for a discussion of several topics, to include cruise ships and air cargo, avoiding a repeat of the TEU focus of the morning. Yoshitani spoke (justifiably) proudly of the four new international air carriers adding direct flights along with Northwest Airlines adding additional direct service.

Diana Parker says the 3rd runway is "complete," and scheduled to open in November 2008. That third runway is actually the 2nd "all-weather" runway, as it allows our airport to land two jets side-by-side simultaneously.

Tom Green gave some valuable insights into the air cargo services of Seattle-Tacoma International Airport, especially that air cargo is non-discretionary (locally originated or destined). Most intriguing was this first-heard conversion for comparing maritime container volumes with air shipments:

1 TEU max 20 tonnes and one 747 freighter max 110 metric tonnes

So, the region's ports volumes of about 4M TEU's can be compared with the airport's 319K metric tonnes. A very useful resource for those interested in air cargo is the PSRC's air cargo study.

There were other noteworthy reports that either have been addressed in previous blogs, like the challenges before the trucking industry, or perhaps don't exactly fit the purpose of this blog, like foreign direct investment. An especially worthy subject was the presentation by Susan Crane of Port Jobs and readers are encouraged to visit the website for their 2006 study Employment in Logistics and International Trade.

Although not all speakers during the tour are presented in this blog, my personal kudos for their participation in helping our regional leadership attain a better understanding of this most important growth industry for our region: Logistics and International Trade, not a lite subject.

Monday, June 09, 2008

Environment Trumps Growth and Development

J. Christopher Lytle, Deputy Executive Director and CEO of Port of Long Beach (PoLB) said at today's Transportation Club of Tacoma that environmental challenges trump container volume growth or infrastructure development.

Lytle, well traveled among international lines, including some time in Tacoma, spoke of the overriding concerns the Port of Long Beach had with its future development. Their priorities are of no small import (pun intended) given their prominence as a premier port on the West Coast. Begun in 1911, the PoLB is now the 2nd busiest U.S. port, and the 16th busiest in the world. It has 3,600 A., 7 container terminals, 72 cranes. 82% of its revenue comes from containers. Along with 70 million tons of bulk cargoes, the port handles 7.3 million TEUs (twenty-foot equivalent units). That represents $140 billion in cargo value. For the future, the forecast is that containers at PoLB will increase from 15.7 million in 2007 to 42.7 million TEUs by 2030.

Lytle said projects aren't getting done because of environmental issues, and air quality is the top issue of the top environmental issues. In 2005, the PoLB adopted its Green Port Policy, and in 2006, its Clean Air Action Plan, along with its regional partners including the Port of Los Angeles (PoLA). Among its goals, reducing San Pedro Bay pollution by 45% within 5 years, cleaning up trucks and equipment, adopting shore-side electricity and low-sulfur fuels.

PoLB recognizes that vessels are 50% of its problem with trucks 25%. To accomplish these goals, the PoLB has adopted an incentive plan to encourage vessels to reduce speed, and 90% of lines have complied to get reductions in fees. The port has also instituted green leases, a new locomotive fleet and low-sulfur fuel incentives. (The PoLB will pay the difference between low-sulfur and other diesel fuels, a $10 million expense.) The port has even partnered with others in funding a hybrid tug!

Lytle also said the PoLB expects its lines to be good community partners. (I suggest joining the Chamber.) He gave examples of OOCL donating $140,000 ($100,000 to an ADA-park; $40,000 for school computers) and Hyundai $100,000 (for a local high school).

To address that 25% of the problem that are trucks, the PoLB has instituted an incentive program to remove all pre-2007 trucks by 2012, to replace dirty diesel within 5 years, and to use a TEU fee to refinance/retrofit truck replacement/participation loans.

He was questioned about the move to convert truck owners/operators to employees. He said the PoLB and the PoLA have different philosophies. The PoLA is supporting the change in the economic model for owners/operators becoming employees of truck lines. The PoLB believes the users of truck services should have choice as part of their economic model. He did agree the old model is broken, and spoke of the concession agreement of providing $150/company or $100/truck for the replacement program. A link quid pro quo is required that truckers meet all federal standards, truck maintenance and NO STREET PARKING that upsets the neighbors. Lytle did clarify that owners/operators would be subsidized with $1,400, splitting 50% each, with the revenue source as the TEU fee (paid by the beneficial cargo owner). And finally, that trucking fees must go up - significantly.

A final question to Lytle was concerning the nature of container fees. While he saw no reason such fees couldn't be used here - (he's been gone too long) - several in the audience quickly explained to him the nature of discretionary cargo (low metro population) and close international competition (Vancouver and Prince Rupert).