Gulf, South Atlantic Ports Said Unready for Panama Canal Expansion

The current expansion will double the Panama Canal's capacity, and the "resulting economy of scale advantage for larger ships will likely change the logistics chains for both U.S. imports and exports," said Robert Pietrowsky, director of the Army Corps of Engineers (USACE) Institute for Water Resources, in a report to Congress June 20 on "U.S. Port and Inland Waterways Modernization: Preparing for Post-Panamax Vessels."

The "injection of successive new generations of post-Panamax vessels into the world fleet could be a 'game-changer' for the U.S. over the long term," Pietrowsky said. He said it can provide a cost-effective complement to the intermodal transport of imports via the U.S. land bridge, "while also re-shaping the service from Asia to the Mediterranean and on to the U.S. East Coast."

"The expanded canal could provide a significant competitive opportunity for U.S. Gulf and South Atlantic ports and for U.S. inland waterways -- if we are prepared. Through effective planning and strategic investment the U.S. can be positioned to take advantage of this opportunity," Pietrowsky said.

The U.S. has ports on the West Coast and East Coast that are expected to be ready with post-Panamax channels in 2014, but there is a lack of post-Panamax capacity at U.S. Gulf and South Atlantic ports, Pietrowsky said: "The very regions geographically positioned to potentially be most impacted by the expected changes in the world fleet."

USACE has 17 studies investigating the opportunity to economically invest in deep draft ports, the report said. At the Port of Savannah, USACE has identified an economically viable expansion to accommodate post-Panamax vessels, with an estimated cost of $652 million dollars, it said. If some of the remaining studies show economic viability, "the challenge will be to fund these investments," he said. He said investments in inland waterway locks and dams also will be needed.

"Given this opportunity presented by the deployment of post-Panamax vessels, it is critical that the U.S. develop and move forward with a strategic vision for a globally competitive navigation system," Pietrowsky said. He said there will be a need to consider new and innovative public and private funding sources and financing methods.

• The report said some financing options include:
• Increase Federal appropriations in the USACE budget for harbor maintenance and improvements while maintaining current cost share responsibilities.
• Increase Harbor Maintenance Trust Fund (HMTF) user fees and allocate increased revenue to harbor improvements.
• Maintain or increase Federal appropriations and also increase local cost share requirements.
• Encourage individual port initiatives by phasing out the HMTF, expecting individual ports to collect their own fees and make their own investment and maintenance decisions.
• To support waterway improvements, increase the fuel tax and provide increases in Federal appropriations to track with the increased revenues flowing into the IWTF; depending upon the revenues from the fuel tax, reduce the share of total costs that is paid from general appropriations.
• Replace the fuel tax with a vessel user fee and/or combine the fuel tax with a vessel user fee and increase revenue and appropriations for improvements at least by the amount of the increased revenue.
• Implement public-private partnerships with the responsibility for improving, operating and maintaining the inland waterway navigation infrastructure along specified segments of the system.

Another issue is the environmental impact of the port and waterway improvements, the ACE report said. "Potential infrastructural development along coasts and waterways is a concern because coastal ports and inland waterway infrastructure is closely associated with two of the scarcest types of ecosystems—free flowing rivers and estuarine wetlands," the report said.

The report said other issues include:

• A modernization strategy should be part of a national transportation strategy that considers multi-modal connectivity and capacity of the intermodal freight transportation corridors.
• Opportunities to contribute to the Administration's initiative to increase exports, energy independence and enhance national security should be considered.
• Local sponsor commitment in terms of cost sharing and community support should be taken into consideration.
• Consideration should be given to ports that facilitate traffic to multiple regions of the country as opposed to serving only a local catchment area.
• When infrastructure projects are planned, designed and implemented, they should explicitly include the concept of adaptive management.