AGENDA ITEM #14: PANAMA CANAL EXPANSION: VIRGINA PORT AUTHORITY

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1 AGENDA ITEM #14: PANAMA CANAL EXPANSION: VIRGINA PORT AUTHORITY SUBJECT: The Panama Canal Expansion Third Set of Locks project BACKGROUND: The expansion of the Panama Canal (Third Set of Locks) is a project proposed by the Panama Canal Authority and will double the capacity of the Panama Canal by 2014 by allowing more and larger ships to transit. This project will create a new lane of traffic along the Canal by constructing two lock complexes one on the Atlantic side and another on the Pacific side. According to the attached article published in September 2010 in the Commonwealth Contractor publication: In 2014, the Canal expansion will be complete and its new set of locks will open allowing the latest breed of vessels to transit and possibly bypass west coast ports in favor of the east coast. Presently, 35 to 40 percent of the cargo coming into and leaving the Port of Virginia transits the Panama Canal and with Virginia being the only US east coast port with the necessary water depth to accommodate larger vessels, it is likely that number will considerably increase; and while the exact increase with the new locks is unclear today, there is no doubt that the expansion will compliment VPA s assets and give Virginia the upper hand on the competition. A representative from the Virginia Port Authority will brief the HRTPO Board on this item. RECOMMENDED ACTION: None required; for informational purposes only. Hampton Roads Transportation Planning Organization Board Meeting July 21, 2011

2 Issue 14 POLITICS AND INFORMATION Norfolk International Terminals Suez cranes By Charles R. de Cuir The Panama Canal and ThePort of Virginia Intertwined Histories Lead to a Solid Future Photo provided by VPA Panama and Virginia maritime paths have been intertwined since the days when setting out to explore for new lands on open waters was commonplace; and for good reason, both regions feel comfortable staking claim to the title of the Gateway to the Americas. It was early explorers that recognized the potential Panama, a narrow stretch of land between North and South America, had as a plausible trading access between the Caribbean and Pacific; and it was also those explorers that decided Virginia was a good place to set up the first permanent English settlement in the New World. Both Panama and Virginia are gateways in their own right. 20

3 Issue 14 POLITICS Issue AND 1 COVER INFORMATION STORY A Quick History Fast forward several hundred years into the settled Americas and the Panama Canal is vital to east-west trade, reducing a voyage from New York to San Francisco by some 8,000 miles and roughly 30 days; while Virginia is on its way to being the east coast hub for maritime business. In the late 1930s with Europe on the brink of its first World War, the need for the Canal to be wide enough for battleships to easily transit takes front and center and the plan for its first expansion takes shape. In early 1937 the United States Congress sets in motion a plan to expand the Canal and improve its defense capabilities. This first expansion creates three new locks and adds a single parallel lane to the Canal. In the 1950s the Virginia Port Authority (VPA) has been created to manage the Virginia ports; and in 1957, by the efforts of the Hampton Roads maritime community, the Craney Island Disposal Area is completed. Today on Craney, VPA together with the U.S. Army Corps of Engineers are constructing both a dredged material placement area and a new state of the art port facility for VPA. Presently and more specifically on July 6, 2010, VPA signed a 20-year lease with APM Terminals, the most technologically advanced marine cargo facility in the world, that gives VPA the operational responsibility over the APM facility in Portsmouth. The additional 4,000 linear feet of berth and 3.3 miles of on-site rail link the facility to rail giants, Norfolk Southern and CSX. The operations are highly automated and can currently accommodate 1.4 million 20-foot equivalent units (TEUs) annually. VPA will manage the terminal through its private operating company, Virginia International Terminals, Inc. (VIT). "In my experience this is the biggest deal of my career and I am very proud to have been part of it," says Joseph A. Dorto, VIT's general manager and CEO. "I believe this cements a very bright future for The Port of Virginia and our customers." The first Canal expansion created three new locks; Miraflores, Pedro Miguel and Gatun. Each new chamber was m long, 42.67m wide and 13.72m deep. By comparison the 2014 edition of the Panama Canal expansion will have the following capabilities; m long, 54.86m wide and 18.28m deep. A Promising Partnership Our partnership with VPA is more important than ever. As we embark on the next phase of the expansion project, data sharing and market studies exchange will continue to be essential elements of our collaboration, says Alberto Aleman Zubieta, administrator and CEO of the Autoridad del Canal de Panamá (ACP). In April 2008 Zubieta and Jerry Bridges, executive director of VPA signed a Memorandum of Understanding (MOU) signifying the partnership between the ACP and VPA. A significant inclusion in the MOU is an opening acknowledgment of the commitment to the future of both ACP and VPA. The Parties hereto believe it is in their mutual interest to establish an alliance of cooperation for information sharing aimed at generating new business by promoting the all water route between Asia and the North American East Coast of the Port of Virginia via the Panama Canal. While the expansion of the Canal is vital to world commerce, the Virginia Port Authority is also positioning itself for increased demand by building infrastructure and incorporating the necessary enhancements to accommodate the growth that is to come, confirms Bridges. Build It and They Will Come The Craney Island Dredged Material Management Area is a 2,500 acre confined dredged material disposal site located close to Norfolk, Virginia. The area is designed to be a long-term disposal area for material dredged from Hampton Roads channels and ports. Prior to World War II, dredged material for the most part was disposed of in open water sites. The development of the Craney Island Disposal Area was passed by Congress under the River and Harbour Act of 1946 in response to the need to have a designated area for dredged material. between Austria and Italy, there is a section of the Alps called the Semmering. It is an impossibly steep, very high part of the mountains. They built a train track over these Alps to connect Vienna and Venice. They built these tracks even before there was a train in existence that could make the trip. They built it because they knew some day, the train would come. ~Frances Mayes Currently the world s shipping companies are gearing up for the future with the next generation of vessels. These new builds will provide greater capacity for manufacturers to move more product and increase transit revenue as they pass through the new Panama Canal. So if the ships are bigger and the Canal is bigger what about the ports? 21

4 Issue 14 POLITICS AND INFORMATION Provided by Charles de Cuir of $13.5 billion of employee compensation and $41.1 billion in total state revenue. In February the biggest vessel to ever come to The Port of Virginia arrived without incident; this vessel was too big to transit the Panama Canal, so it sailed to Virginia via the Suez Canal. When the new locks open, we will see more and more of this class of vessel but they will reach Virginia via Panama. Miraflores locks and mules Thanks to the ever-focused vision of the VPA, the ports of Virginia are technologically and logistically prepared. Even before the Canal Expansion Resolution was passed VPA had designed, constructed and delivered Suezclass cranes with the ability to service vessels not yet built, in addition to keeping the ports deep water entrances accessible to these yetto-be-built-class vessels. Virginia s Port Advantage Based on the 2006 Virginia Economic and Fiscal Impacts of Virginia Port Authority Operations report undertaken by the Mason School of Business Compete Center and the College of William and Mary, issued in January 2008, the VPA s economic engine creates 9 percent of the Commonwealth s workforce to the tune In 2014, the Canal expansion will be complete and its new set of locks will open allowing the latest breed of vessels to transit and possibly bypass west coast ports in favor of the east coast. Presently, 35 to 40 percent of the cargo coming into and leaving the Port of Virginia transits the Panama Canal and with Virginia being the only U.S. east coast port with the necessary water depth to accommodate larger vessels, it is likely that number will considerably increase; and while the exact increase with the new locks is unclear today, there is no doubt that the expansion will compliment VPA s assets and give Virginia the upper hand on the competition. Distribution Facilities in Virginia 22

5 Issue 14 POLITICS Issue AND 1 COVER INFORMATION STORY Panamax and New Panamax are terms used to define the size limits for ships traveling through the Canal. Ships that do not meet the specified Panamax-sizes are referred to as Post Panamax. The size is limited by the width and length of the available lock chambers, by the depth of the water in the canal and by the height of the Bridge of the Americas. Provided by the ACP Proposed Pacific locks Characteristics of Virginia ports that set them apart include: 50-feet-deep shipping channels making them the deepest on the east coast. no overhead bridge obstructions to impede large vessels, a terminal complex that is within a day s drive of two-thirds of the nation s population, no congestion at the terminals, the most technologically advanced, efficient container terminal in the world, expanding double-stack rail capabilities with the opening of the Heartland Corridor in the fall of 2010, on-dock rail access to the east s two Class-I rail carriers: NS and CSX. 24 warehousing and distribution centers with total investments topping $600 million and 7,000 jobs. Vision for the Future While Hampton Roads main shipping channels are the deepest on the east coast, they still may not be deep enough to accommodate the Post-Panamax cargo ships being built now. Continuing to stay ahead of the competition, the VPA and Hampton Roads maritime community have outlined five priority navigation projects that focus on maintaining unrestricted navigation in the Port. These priorities will help the Port reach its full potential, engage the ACP partnership and position the Port to support development of off-shore energy projects. Virginia s Inland Port (VIP) also puts the Commonwealth in front of its competition. The VIP opened in 1989 and its location in Northwestern Virginia, situated near the intersection of I-66 and I-81 makes it a significant asset as trucks carrying cargo out of the Shenandoah, Blue Ridge and Ohio Valleys stop there to transfer loads to rail that are sent to the port on daily trains and vice versa. Because of VIP s location and direct service to the Port, companies including Home Depot, QVC, Target, Sysco Foods and Cost Plus Inc. have located to the area. Today, Warren County and its surrounding areas are home to Proposed Craney Island VPA Port Provided by the Corps of Engineers 23

6 Issue 14 POLITICS AND INFORMATION The Big 5 include: maintaining the Norfolk Harbor Channel and Craney Island in a timely manner, expanding Craney Island eastward increasing its capacity and providing space for the VPA to build its fourth marine terminal needed to handle cargo volumes projected to rapidly increase in coming years, constructing the Elizabeth River Southern Branch 40 and 45 foot projects to fully authorized widths and depths allowing for bigger ships, widening offshore lane approaches on the South Atlantic Ocean Channel to a two-lane channel approximately 3,000 feet wide with a more efficient buoy configuration, constructing the 55-foot depth project to fully authorized widths and depths. The VPA and ACP are also leading the pack regarding sustainability issues. ACP has put together The Panama Canal Green Initiatives that includes environmental legislation, regulation and management programs, inter-institutional coordination, socio-environmental activities and The Green Route Concept; a strategy designed to meet head-on environmental challenges associated with the Canal expansion; specifically the Panama Canal Watershed and the reduction of emissions in the worldwide shipping industry. WE START WITH A PLAN, TOO. OUR CUSTOM THREE-STEP PROGRAM CAN LOWER YOUR NET COST. Managing your Workers Compensation claims is our passion. Likewise, the VPA voluntarily implemented an emissions reduction program in 1999 that focuses on the lowest emission engines available from suppliers and cargo handling equipment. Despite the 55 percent increase in cargo volume, the program reduced air emissions from cargo handling activities by 30 percent during its first five years. The expectations for 2005 through 2015 are for emissions to decline an additional 38 percent, even with the projected 49 percent increase in cargo volume. In addition, VPA uses ultralow sulfur diesel fuel throughout the port facilities resulting in further particulate matter emission reduction. Also, in 2007 VPA launched the Green Operator program in partnership with the U.S. Environmental Protection Agency encouraging the voluntary purchase of new or retrofitted low emission trucks by local truckers. This is the first voluntary diesel retrofit program at a U.S. Port. Conclusion Workers Compensation, Commercial Automobile, Property, General Liability, Umbrella, Group Benefits and Bonding. Risk managers for more than 250 contractors. While the effect of the expansion on Virginia and the VPA is difficult to peg, the fact of the matter is that both ACP and VPA have positioned themselves to charge into the future economically, technologically, environmentally, politically, and operationally as true visionary entities. The expansion coupled with the foresight by the VPA in preparing Virginia s ports to accommodate the future of maritime transportation gives Virginia the competitive advantage. Charles R. de Cuir is the maritime director with Rutherfoord MMA.