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US Army Corps of EngineersBUILDING STRONG®

National Waterways Conference2012 Legislative Summit

Bob Pietrowsky, Director USACE Institute for Water Resources

Keith Hofseth, Program Manager

27 March 2012Madison HotelNW, Washington, DC

US Army Corps of EngineersBUILDING STRONG®

U.S. Port and Inland Waterway Modernization Strategy

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U.S. Port and Inland Waterways Modernization Strategy

As directed by Congress:

 

Within the funds provided, the Institute for Water Resources is directed to submit to the

Senate and House Committees on Appropriations within 180 days of enactment of this Act, a

report on how the Congress should address the critical need for additional port and

inland waterway modernization to accommodate post-Panamax vessels. This study will

not impede nor delay port or inland waterway projects already authorized by Congress.

Factors for consideration should include costs associated with deepening and widening

deep-draft harbors; the ability of the waterways and ports to enhance the nation's export

initiatives benefitting the agricultural and manufacturing sectors; the current and projected

population trends that distinguish regional ports and ports that are immediately adjacent

to population centers; the availability of inland intermodal access; and the environmental

impacts resulting from the modernization of inland waterways and deep-draft ports.

• Conference Report on the Consolidated Appropriations Act fro Fiscal Year 2012

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Source: Panama Canal Authority (ACP)Source: Panama Canal Authority (ACP)

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   Maersk’s “Triple E Class” is a family of large, fuel efficient containerships designed as successors to the Maersk E-class

In Feb 2011, Maersk awarded Daewoo Shipbuilding (South Korea) a US $ 1.9 billion contract to build 10 “E3” ships, with options for more

These will be the most efficient containerships in the world, per TEU.

Name “Triple E” is derived from the class’s three design principles: (1) Economy of Scale (2) Energy Efficient, and (3) Environmentally Improved

And….. Larger Vessels are Already on Order

Maersk E3 Class 18,000 TEU capacity

Design draft of 48 feet

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U.S. Port and Inland Waterways Modernization Strategy

• Focus: How Congress should address critical need for additional port and inland waterway modernization to accommodate post-Panamax vessels.

• Factors to address: • Costs associated with deepening and widening deep-draft

harbors; • Ability of waterways and ports to enhance export initiatives

benefitting the agricultural and manufacturing sectors; • Current and projected population trends that distinguish regional

ports and ports that are immediately adjacent to population centers;

• Inland intermodal access; • Environmental impacts resulting from modernization of inland

waterways and deep-draft ports.

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Study Team

  The team draws from both navigation PCXs, IWR, EDRC, multiple districts and the private sector, with intensive HQ oversight and public outreach:

• IWR • DD NAV PCX • Inland Nav PCX • HQ Oversight via CECW• CECTX • ERDC • Mobile District • Jacksonville District • Private Sector

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Schedule

  

Selected Milestones:• PDT formed, PMP, report outline, input from PCX’s – completed• Website, fact sheet, talking points – completed with goal being

transparency, no surprises, elicit info to ensure we don’t miss things• Stakeholder Engagement & Public Communications – ongoing

Listening Sessions SWG Ports – 8 Mar Environmental Interests – 13 Mar ITTS - 14 Mar; Nav Industry Mtg - 15 Mar; AAPA - 16 Mar Ongoing Coordination with MARAD, others ongoing

• 80% draft report – 1 April (Stakeholder Engagement Continues)• PDT, IWR, USACE & EPR Review, Report Revision, and Final Draft to

HQUSACE – 1 May • Concurrent EPR, HQ, OASA (& OMB? - TBD) Review – 22 May• Report Revision, Completion, OMB & Interagency Review – 1 June • Transmit Final Report to Congress – June 20

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BLUF: Implications & Preliminary Findings Thus Far

  

1) The U.S. is a maritime Nation & the U.S. MTS is absolutely foundational to Nation’s Economy. Growth in trade and increasing size of vessels likely calling at U.S. ports presents challenges & opportunities for both inland waterways & coastal ports.

2) Role of inland waterways should not be overlooked – particularly with regard to Canal expansion stimulating increased export traffic in Gulf.

Inland Waterways, New Orleans (Port of Southern Louisiana) and other Gulf and South Atlantic ports have potential to be affected by expansion of the Panama Canal not just by container trade, but also by vessels transporting bulk commodities.

3) Cascading effect of the deployment of new, larger Post-Panamax vessels which will gradually displace the current fleet of “large” vessels to next most efficient service/trade routes to/from U.S. points to impacts beyond largest U.S. ports

4) Larger post-Panamax vessels are significantly wider and longer – wider channels and more robust channel radii & larger turning basins may be among more critical needs at U.S. ports with expanded Canal.

5) Financing critically needed maintenance & capital projects will be a huge challenge under current constrained Federal budget

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Forecast Total World Container Trade2000 - 2015

Source: IHS Global Insight, Inc. Dec 09

SlightDecline

Decline fromPrevious forecast

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Forecast: U.S. Trade More Than Doubles

2008 - 2028

0

10

20

30

40

50

60

70

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028

Imports Exports Total

Source: I H S G I World Trade Service

Millions of TEUs

February 2012IHS Global Insight World Trade Service 10

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An Economic Game-Changer! Post-Panamax Transport Capabilities

Expanded canal will be an alternative to intermodal transport of imports via U.S. West Coast to East land bridge, and to Midwest to Columbia-Snake for grain & other bulk exports

The Inland Waterways play key role in the cost efficient transport of grains, oilseeds, fertilizers, petroleum products and coal. Gulf ports play key roles in the transport of these commodities, such as with New Orleans as the dominant port for the export of grains in the U.S.

Inland Navigation on the Mississippi River system will be affected by expansion of the Panama Canal -

• With an expanded dimension Canal, Panamax vessels can be loaded to full capacity at New Orleans

• Smaller Capesize vessels that can fit through the expanded Canal can be accommodated by drafts of Mississippi River ports

World demand for grain may cause grain traffic to increase on all routes, including the Mississippi River and Columbia-Snake River systems

In addition, U.S. ethanol subsidies are scheduled to expire next year.

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Agricultural Areas Proximity to Waterways - Exports

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• Forecasts indicate that larger bulk vessels through the Canal have potential to significantly reduce the delivery cost of U.S. grains to China – some say by as much as $0.35 per bushel.

• Grain Exports– Over 70 million tons

annually– 50% of grain, soybean

and prepared feed exports move by barge

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Ready for Panama Canal Expansion? Key U.S. Harbors 45’ or Greater *

WEST COASTSeattle/Tacoma (>50’)Oakland (50’)LA/LB (>50’)San Diego

GULF COAST Mobile New Orleans Houston/Galveston/Texas City Corpus Christi Freeport

EAST COAST NY/NJ (50’ underway) Baltimore (50’) Hampton Roads (50’) Charleston Morehead City

OTHER PORTS Miami (44’) Tampa (43’) Savannah (42’, w/study recommending 47’ Wilmington (42’) Jacksonville (40’) Boston (40’)

* Current Main Channel Depths

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   Not Just Deeper Channels

Larger post-Panamax vessels are significantly wider and longer – wider channels and more robust channel radii & larger turning basins may be among more critical needs at U.S. ports with expanded Canal.

In addition, for U.S. Ports to accommodate larger container vessels they will need to expand capacity in berthing areas at the dock and to intermodal access.

Underlines the need for synchronizing intermodal freight strategies on land and water sides.

Implications & Preliminary Findings Thus Far

(Continued)

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Financial Implications

  

The report will highlight opportunities presented by increased use of post-Panamax vessels & the range of costs needed to take advantage of the opportunity.

Given current Federal Budget Constraints

• Report will present a range of options for meeting critical needs – at two ends of the spectrum there is either an increased Federal role (increase in spending) or a change in the dynamics between the traditional USACE role & that of non-Federal sponsors.

• Between these extremes there is a range of options in form of alternative financing possibilities; PPP’s, Infrastructure Banks, etc.

The ports and industry will need a clear direction from the Congress on where the U.S. is headed along that spectrum

Food-for thought - "what's next?” - How will USACE, Congress and industry utilize report upon completion?

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Rail Industry Investments in Class I Railroad Track, Equipment & Capability

to Compete for Cargo

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Class I Railroad capital expenditures

Source: The United States Department of Transportation; Study of Rural Transportation Issues; Published April 2010.

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• Implications for vessel re-routings stimulated by the Canal expansion?

• Rate of overall growth of global economy? • Future trade growth rate – competition

between the U.S. land bridge vs. the Panama Canal?

• Use of Tran-shipment Hubs – Bahamas? Other Caribbean locations?

• Future funding levels may be constrained by growing federal deficit

Uncertainties Impacting Harbor & Waterway Investment Decisions

• These uncertainties imply that an adaptive approach to capacity expansion will be required

• Future vessel fleet – on what trade routes will future vessels be deployed? – and at what ports will they call?

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Thank You! Questions?

U.S. Port and Inland Waterway Modernization Strategy

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