Feasibility of an Intermodal Transfer Facility in the Willamette Valley. Final Report December 14, 2016

Transcription

1 Feasibility of an Intermodal Transfer Facility in the Willamette Valley Final Report December 14, 2016

2 Study Background and Scope Legislature directed Business Oregon and IFA to evaluate the business case for an intermodal facility and rail connections from the Willamette Valley. Driving factors for the study included: Disruption of Port of Portland s Terminal 6 container service reduced Oregon s agricultural exporter s shipping options and increased costs for many exporters. Looking for options to increase resiliency of Oregon s agricultural exports to future transportation disruptions. Increasing highway congestion challenges.

3 Study Background and Scope Intermodal Transfer Facility (ITF): Facility that supports shipping intermodal containers by rail. Provides specialized equipment to lift intermodal containers from truck chassis to rail car and back, and/or between different truck chassis. Located on rail line, provides space for assembling trains. Does NOT provide transloading services: moving goods from one type of container to another. Does NOT provide warehousing of commodities or longterm storage of containers.

4 Study Background and Scope Focus on the business case for an ITF: Size of market and factors influencing demand Potential revenue Capital and operating costs Address need and potential strategies for public investment in an ITF. Qualitative assessment of the ITF s potential benefits to the public.

5 Study Background and Scope Analysis detailed in two Technical Memoranda 1: Size of Market and Demand for ITF 2: Cost, Revenue, Public Investment, and Benefits This report summarizes the findings of the analysis. For more detail, refer to the Technical Memoranda.

6 Outline of this report 1. Size of the Market for the ITF 2. Demand for the ITF 3. Costs and Revenue for the ITF 4. Public Investment and Benefits

7 1. Size of Market for the ITF

8 Market Study Area Includes Willamette Valley south of Salem (shippers north of Salem, even in Marion County, would likely continue to truck to Portland or Ports of Tacoma and Seattle). Oregon Coast (Lincoln County and South) Southern Oregon, including Klamath County Excludes Central and Eastern Oregon (continue to use Boardman facility) Northwestern Oregon (continue to go direct to Portland or Ports)

9 Quantifying the Size of the Market Study uses Oregon Phytosanitary Certificates issued in Records of agricultural products bound for export Identified those originating in the study area, and bound for international export by container. Confirmed and verified through interviews with producers and shippers.

10 Quantifying the Size of the Market Containerized exports identified from the phytosanitary certificates: Straw Hay Lumber and Wood products Potatoes Seeds and Grains Nursery Stock (limited)

11 Quantifying the Size of the Market Additional relevant exports (from interviews): Pulp Exports considered but excluded: Most nursery stock: outside study area; not large numbers of containers. Christmas greenery and trees: many growers outside study area; very time-sensitive.

12 Quantifying the Size of the Market Did not quantify: Processed/manufactured food products, manufactured wood products, metal products Likely small number of containers relative to those quantified. Domestic shipments Potentially large number of containers or trailers Additional capital equipment would be required to handle trailers

13 Quantifying the Size of the Market Approximately 38,170 confirmed 40-foot container exports per year 4% 3% Proportion of containers by commodity: 8% 13% 7% 65% Straw Pulp Lumber and Wood Products Seeds and Grains Hay Potatoes Nursery Stock <1% (Not Shown)

14 Quantifying the Size of the Market Port Import-Export Reporting Service (PIERS) data analysis from The Tioga Group, Inc.: 30,475 containers in 2014 Not quite apples to apples, but good point of reference. Import estimate: Approximately 9,000 containers imported to the Valley and Southern Oregon areas per year (PIERS data).

15 2. Demand for the ITF

16 Demand for ITF Interviewed shippers to understand current costs and factors influencing demand. After the shock of T-6 closing, adjustments occurred in container and transportation prices and service levels from transporters (e.g., Northwest Container Services). Reliability has stabilized. Shippers have largely adjusted to the new set of shipping options and prices.

17 Demand for ITF Demand for ITF influenced by characteristics of alternatives. Price, but also non-price factors. Estimating cost of transporting containers difficult, because some portion of transportation cost is often included in the container cost set by ocean carriers. Through interviews, we sought to isolate the cost for moving a container to and from the Ports of Seattle and Tacoma.

18 Demand for ITF Current options for moving container to and from the Ports of Seattle and Tacoma: Option 1: Trucking/Rail RT COST: $1,200 Option 2: Trucking RT COST: $1,450

19 Demand for ITF Non-price factors are very important to shippers: Time Less time in transit is better. Flexibility in departure times is useful. Reliability Assurance of meeting ocean carrier cutoff is critical. Container Availability Greatest at Ports of Seattle and Tacoma. Without the right container available, delays will occur. For many shippers, these non-price factors favored truck over rail. Shippers with high volumes saw more benefit with rail.

20 Demand for ITF Developed estimates for potential transportation cost via ITF, using assumptions for ITF location and shipper location. Compared transportation cost from ITF (Option 3) to current options. Uncertainty highest for Option 3 costs: Local trucking costs highly variable. Cost of rail service dependent on many unresolved questions, such as which railroad(s) are involved, number of rail cars, and frequency of service, etc.

21 Transportation Options, With ITF Option 1 and Option 3 have similar costs, with Option 3 slightly more expensive under these assumptions. Costs of Option 3 could be reduced substantially if importers cover cost of south-bound trip. (See Option 3 only export) Actual costs may vary substantially by shipper, depending on volume shipped, contract rates, specific location, etc.

22 Preliminary Conclusions from Market Analysis ITF is not always the cheapest option, but it s not the most expensive, either. Shippers do not always choose the least-cost transportation option. Non-price factors weigh significantly in their decisions. Cost, reliability, time, equipment availability are all essential ingredients for capturing demand at the ITF.

23 3. ITF Facility Costs and Revenues

24 Site Characteristics Site Features Approximately 14 acres Paved Fenced 6,000 feet of track Location Features On rail main line Near major highways, ideally very close to I-5 Roads from highway to ITF capable of handling weight and quantity of trucks.

25 ITF Capital and Operating Costs Based on scenarios that vary primarily by container volume, ranging from approximately 5,000 to 76,200 containers per year. Facility size is fixed at the minimum configuration to provide basic services. Some costs scale with volume. Additional capital costs for additional lift equipment. Variable operating costs include additional employees to operate additional lifts, and fuel and maintenance costs for those lifts.

26 ITF Facility Capital Costs Capital costs, excluding land, would be about $7 Million. Annualized capital costs, including the carrying cost of land, would be $624,000 to $670,000. Capital cost per container ranges from $9 to $120, depending on volume of containers.

27 ITF Facility Operating Costs Fixed operating costs would be approximately $221,000 per year. Variable operating costs range from about $13,000 to $289,000 per year depending on volume of containers. Total operating costs range from about $234,000 to $510,000 per year. Operating costs per container range from about $7 to about $45.

28 ITF Capital and Operating Costs Total cost per container handled: $15 at 76,200 containers per year $165 at 5,200 containers per year Volume drives cost per container. The more containers handled at the ITF, the lower the cost per container.

29 ITF Revenue Industry charges per container lift (i.e., moving a container from a truck to rail, or rail to truck) range from $20 to $50. Class 1 railroads typically charge at the high end of that range. Lower per-container lift fee would result in higher volume of containers; higher fee would result in lower volume. Depending on volume, revenue could range from $260,000 to $1.5 Million per year.

30 ITF Revenue and Cost Comparison If the ITF could get $50 per lift, the break-even volume would be about 20,000 containers per year. If the ITF charged only $20 per lift, the breakeven volume would be about 60,000 containers per year. Number of Containers per Year Comparison of ITF Costs and Revenues per Container 76,200 $15 62,400 $17 20,800 $43 5,200 $165 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 Cost per Container $20 Container Lift Fee $50 Container Lift Fee

31 Opportunities to Improve Feasibility VOLUME: Increasing volume reduces per-container costs and increases revenue. COST: Reducing local trucking costs and reducing rail costs likely to increase demand for ITF by exporters. Use by importers increases container availability and reduces round-trip costs for exporters. RELIABILITY and TIME: Frequent (daily, if possible) train departures ideal to compete with trucking. EQUIPMENT AVAILABILITY: Cooperation with ocean carriers to ensure timely container availability for exporters. Use by importers also improves equipment availability.

32 4. Public Investment and Benefits

33 Public Sector Investment Public sector may help the ITF financially by: Providing land. Reduces capital costs. Guarantee bonds. Reduces financing costs and/or increases access to capital. Subsidize capital costs. Reduces capital costs directly through grants. Subsidize operating costs. May be helpful in early years as ITF builds demand but operates at low container volumes.

34 Public Sector Investment Public sector may help ITF in other ways: Coordinate with railroads. Essential for the ITF to be successful. Negotiate solutions for removing paper barriers that narrow options for flow of rail traffic. Focus on solutions that reduce rail costs. Coordinate with ocean carriers. Secure support for prioritizing container availability at ITF. Coordinate with large importers. Increasing use of the ITF by importers has potential to increase container availability for exports and reduce round-trip costs, improving the ITF as an option for exporters compared to other options.

35 Public Benefits Intermodal container transportation is associated with public benefits, because it reduces the number of trucks on highways. Congestion cost reduction. Benefits Oregon businesses and citizens, by reducing time spent driving and increased fuel costs. May have far-reaching positive effects on Oregon s economy. Air pollution and greenhouse gas reduction. Rail more efficiently moves containers than trucks, reducing emissions per ton of freight moved. Reduced highway maintenance costs. Transporting heavy freight by truck has disproportionate impacts on highway wear and tear, increasing maintenance costs per mile relative to other kinds of traffic. Shifting this to rail reduces highway maintenance costs.

36 For more information, contact Sarah Reich, Project Manager