President Obama’s much publicised difficulty in getting federal funding approval for new projects, such as healthcare reform, is also affecting port development at a critical time. With the opening of the Panama Canal’s enlarged locks looming in mid-2015, the race is on for US ports to get ready for the arrival of bigger ships in time, but some may not make it.
US East Coast ports are likely to need to invest at least $3.5 billion on improvements to cater for vessels between 5,500 teu and 13,000 teu vessels that will be allowed through the expanded Panama Canal for the first time in 2015. For example, the Port of Savannah’s plan to deepen its harbour to 47ft (14.3m) has a construction budget of $652 million. The raising of the Bayonne Bridge in the Port of New York/New Jersey to allow larger container ships to pass underneath will cost $1.29 billion, whilst the Port of Charleston plans to deepen its harbour to 50ft (15.2m) at mean low water at an estimated cost of $300 million.
In Florida, the Cabinet recently approved the allocation of $150 million in bond proceeds to finance port projects across the State through the Seaport Investment Program, with the bulk of the money to be spent in Miami, Port Everglades and Jacksonville, helping to prepare them for the expanded Canal. In the case of Jacksonville there is also a specific channel dredging project with an estimated cost of $733 million to move from the current 40ft (12.2m) to 47 ft (14.3m).
The sums involved are huge, therefore, and are collectively starting to approach the $5.25 billion cost of expanding the Panama Canal itself. In comparison to these numbers, the US Department of Transportation’s recent $100 million award towards the funding of various port developments under its TIGER (Transportation Investment Generating Economic Recovery) discretionary grant program seems like a drop in the ocean.
Main US East Coast port infrastructure investment for expanded Panama Canal implications
The logjam in federal funding is just part of the problem, however, because both raising and spending money on ports in the US is not straightforward. National, state and local politics have a strong bearing on where money is allocated, because a combination of federal, state and local funding is usually deployed. In the case of Charleston for example, the state General Assembly set aside $300 million last year to cover the entire cost of the Charleston project, just in case the federal government will not, or cannot, provide all the money. Added to this is the fact that the US Army Corps of Engineers oversees and authorises the dredging of all US ports – so it is not in the hands of the ports to decide when it is done. The Army Corps has to demonstrate best value for scarce public dollars, as well as assessing the myriad environmental issues.
The Bayonne Bridge should be raised by the end of 2015, in time for the opening on the expanded canal, but Charleston does not expect dredging to be completed until 2018-19 and in any case the decision will be made by the US Army Corps of Engineers. For Savannah, no specific date has been announced but it is likely to be a similar timescale to Charleston. Again, the decision will be made by the Army Corps.
The need to ready East Coast ports for the expanded Canal is clearly increasing in terms of political awareness though. US vice president Joe Biden for example recently visited the ports of Savannah and Charleston and issued a rallying call saying “With the modernization of the Panama Canal ……… 50-foot-deep channels will be required; already, some of these ships are coming through the Suez, and across the Atlantic”. President Obama has had the “We Can’t Wait” initiative in place since mid-2012. This aims to fast track the permitting process for dredging and bridge works at five East Coast ports (seeking to reduce the time taken for feasibility studies from an average of 10 years to 3 years, for example) but crucially it only covers the permitting and review process, not fast track funding.
Amongst East Coast ports, one or two are already sitting pretty: Norfolk, Virginia already has 50ft (15.2m) draft as well as some of the largest gantry cranes in the world – 25 box rows outreach (by comparison the Maersk 18,000 teu Triple E vessels are 23 boxes wide). Baltimore also already has deep water and a new terminal capable of handling new-Panamax vessels.
Our View
Not all US East Coast ports are likely to be ready to meet the needs of the enlarged Panama Canal in time. Norfolk and Baltimore are already ready, and New York/New Jersey and Miami should be prepared by 2015, but some of the east coast heavyweights are lagging behind, so the political wrangling in Washington on budgets and spending is a hindrance.
Source: Drewry Maritime Research