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  • TSTOPVRPM.PHLCHI
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  • WAIT.USA
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  • ITVI.USA
    16,014.360
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  • OTLT.USA
    2.799
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  • OTRI.USA
    22.430
    0.240
    1.1%
  • OTVI.USA
    15,995.600
    10.280
    0.1%
  • TSTOPVRPM.ATLPHL
    2.930
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  • TSTOPVRPM.CHIATL
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  • TSTOPVRPM.DALLAX
    1.330
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  • TSTOPVRPM.LAXDAL
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  • TSTOPVRPM.PHLCHI
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  • TSTOPVRPM.LAXSEA
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  • WAIT.USA
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American ShipperIntermodal

Is LIGTT legit?

Greenfield port plan off Louisiana coast would rely on immigrant investors for funding.

   An investor group with a unique financing scheme that involves a controversial federal immigration program and wealthy foreigners fronting money for a new deep-water port at the mouth of the Mississippi River in exchange for permanent U.S. residency says the government has now cleared the path for it to start work on the project. 
   Principals involved in the Louisiana International Gulf Transfer Terminal (LIGTT) have suggested in public statements that the $1.3 billion greenfield project is moving closer to fruition, when in fact it will take years under the best-case scenario to complete planning and obtain necessary approvals from regulatory authorities. 
   Meanwhile, serious questions remain about whether the project will require supplemental loans from traditional sources and whether it makes economic sense.
   “I just don’t see where the market is. I don’t see how you would entice anyone to call there,” John Martin, a prominent port economist and head of Martin Associates in Lancaster, Pa., said.
   The developers intend to build a large transshipment hub for supersize container vessels at the end of a spit of state-owned land on the Southwest Pass, the main channel in the delta just east of the Mississippi River where the water is more than 70-feet deep. 
   LIGTT officials say the proposed facility can serve as a mega-hub for the majority of the U.S. consumer market, the Gulf Coast and Caribbean without the depth constraints faced by most other U.S. ports. The vision is for direct water-to-water transfers from a mother ship to smaller vessels docked at opposite sides of the wharf that can distribute cargo up the Mississippi River system to ports such as New Orleans and Memphis, Tenn., as well as along the coast and beyond to Houston; Corpus Christi, Texas; Gulfport, Miss.; Mobile, Ala.; Tampa, Fla.; and Mexico.
   American Shipper initially reported on the concept in May 2008.
   A promotional video on a LIGTT Website touts the advantage of mother ships unloading boxes all at once and returning to home port without having to call additional U.S. ports. Officials have said the heavily automated facility will be built 30-feet above sea level – to protect against hurricanes – on top of dredge spoils poured inside a containment wall.
   The business plan calls for construction at U.S. shipyards of specialized, shallow-draft vessels with three on-board cranes capable of ocean and river navigation to serve the facility, which is planned for more than 2 million TEUs of capacity at the outset and 3.5 million TEUs per year at full build out. Having self-geared vessels ostensibly would allow containers to be lifted at small ports throughout the inland waterway system that don’t have large onshore container cranes. 
   Organizers claim that economic studies show the terminal will generate about 180,000 direct and indirect jobs within 32 states, of which 34,000 will be in Louisiana over 10 years.
   The deep-water terminal concept is modeled on the Louisiana Offshore Oil Port (LOOP), where crude oil tankers too big to enter coastal or river ports offload oil. A big difference, however, is that the terminal is connected by a 25-mile pipeline that can efficiently carry the commodity to storage facilities in Port Fourchon without extra handling.
   The strategy is tied to the scheduled completion of a new, wider lane through the Panama Canal in late 2015 which will allow for triple the size of vessels that can currently transit the isthmus at a time when the maritime industry is transitioning to 14,000-TEU and larger ships to take advantage of operating economies of scale on transoceanic voyages. 
    Most analysts do not foresee a major shift in market share from the West Coast to the East Coast for Asian imports because of the new all-water capabilities. Instead, industry consensus is that existing vessel strings will be consolidated on fewer, less frequent mega-ships that will disgorge cargo at a few major ports with the water depth and landside infrastructure to efficiently handle the big vessels. Ports along the East and Gulf coasts are frantically trying to make the necessary investments to become load centers, but some ocean carriers may opt to drop off cargo at transshipment ports in Panama or the Caribbean and use feeder vessels to serve the U.S. mainland. 
      

Immigrant Investors.
   In mid-December, developer ABK Venture Group announced that U.S. Citizenship and Immigration Services had given approval for it to accept capital from foreign nationals seeking green cards.
   The USCIS decision allows ABK to move forward on planning and engineering for the facility.
   Under the EB-5 visa program established by Congress in 1990, ostensibly to spur the economy, an immigrant investor must put $1 million at risk for a commercial enterprise and demonstrate that it will create or preserve at least 10 full-time jobs for U.S. workers within two years of receiving a visa. Permanent residency is conditional on documentation that the jobs were created based on the invested capital, and ultimately can lead to full citizenship.
   But ABK Venture Group is taking advantage of another part of the program under which LIGTT was designated as a “regional center,” giving it the ability to pool investor money at $500,000 per person if the project can promote economic growth that leads to creation of indirect jobs based on valid economic and statistical forecasting models.
   The EB-5 program has a cap of 10,000 immigrants per year, which has never been met. In 2012, 7,641 people received permanent resident status through the program, according to the State Department.
   Normally, foreigners can only gain U.S. residency by being sponsored by a close relative or an employer seeking skilled workers through an HB-1 non-immigrant visa.
   Examples of facilities built in part with the help of oversees donors seeking U.S. citizenship include the Barclay Center, the new home of the National Basketball Association’s Brooklyn Nets, and the Jay’s Peak ski resort in Vermont. Bloomberg News reported that more than $200 million of the loans used to build the arena came from foreign investors seeking to get into the United States. 
   Critics of the EB-5 program say investors are passive and have few responsibilities or incentives, unlike an entrepreneur, to make sure projects achieve their objective, and that USCIS doesn’t track how many investments actually succeed or fail. Green cards are issued based on “reasonable” economic assumptions at the beginning of the project, they say.
   “I don’t think you should be able to buy a green card. And if you are going to sell green cards, raise the price,” David North, a fellow at the Center for Immigration Studies in Washington, said, noting the Bahamas demands $1.5 million for immigrant investors. 
   Other nations with similar programs demand immigrants speak the language or run the business themselves, or, as in Canada, that the money goes to the government.
   One immigrant North recalled speaking to in Maryland had never laid eyes on the project he invested in and didn’t even know where in New York City it was located.
   “I would say more than 80 percent of the EB-5 visas are granted to people in China,” North said.
   The EB-5 program tends to be utilized by small-scale real estate developers with second-class urban properties who often are constrained from raising enough cash through traditional lending channels. It’s a difficult way to raise money because it adds a large layer of bureaucracy to the process and can only be obtained $500,000 at a time, he said. It also can only fund a small part of a project because the visa cap includes family members of the investor, meaning there are usually much fewer investments than the total number of visas issued.
   The immigrant investor program also is plagued by abuses perpetrated by aliens as well as theft or mismanagement on the part of middle men brokering the investments, North added.
   But lawmakers have continued to support the program because they see it as a way to help bring in money for constituents in depressed parts of a state or district.
   ABK, based in White Plains, N.Y., is pitching the LIGTT to prospective foreign investors, including Chinese millionaires, through its project Website. A fact sheet shows that investors must pay ABK an additional $60,000 in consulting and administrative fees on top of their half-million-dollar investment. 
   One of the apparent appeals of the EB-5 program is that developers can save tens of millions of dollars in interest they would otherwise have to pay as a result of borrowing from the bond market or banks because the foreign nationals are not necessarily seeking a financial return on their investment.
   ABK, which provides a variety of real estate, financial advisory, investment and international business consulting services, is led by Patrick Harvey and Blake Reed. 
   Harvey, a former stock and commodities trader, is one of two founders of the LIGTT venture, which is being pursued through an entity called LIGTT Development Partners, according to his biography. 
   “EB-5 investors will be afforded the same rights and protections as any other investors, so we’re not screwing the investors in any way,” he told American Shipper.
   The public face of the venture is Louisiana State Sen. A.G. Crowe (the A.G. stands for “average guy,” he says), who pushed a bill through the Louisiana legislature five years ago to create a port authority with 17 board members tasked with overseeing development and operation of the LIGTT. 
   “This project is projected to create tens of thousands of new jobs and generate tens of billions in revenue for the next century throughout the interior of the United States, benefitting 32 states and Canada,” the Republican lawmaker and businessman said in a press release. “It will add a third major port of entry to America’s heartland to complement the existing East and West Coast ports of entry.”
   Crowe, who is president of the LIGTT board, has stated in the past that one of his goals is to jumpstart the economy in Plaquemines Parish, which is still suffering the effects of Hurricane Katrina in 2005. He has talked about distribution centers opening in the region to process the cargo.  
   One of the new members of LIGTT’s board is Kelvin Dedner, an executive for Wal-Mart Stores in Louisiana. He replaced Tracy Rosser, who now is senior vice president of transportation and located at the retailer’s headquarters in Bentonville, Ark.
   In an interview, Crowe said the board asked Gov. Bobby Jindel to appoint someone from Walmart again because Rosser had provided great private sector perspective and the company is the world’s largest user of containers.
   Crowe said he and his partners have briefed Walmart’s logistics department about the project. Walmart has a reputation for exploring new ways to improve supply chain efficiency and is generally interested in infrastructure development that provides more options for cost-effectively delivering merchandise to stores, but Crowe said the company has provided no specific commitments.
   Walmart officials indicated, however, that 50 percent of their imported cargo does not require just-in-time logistics measures, which suggests the retailer would be willing to move cargo by river to save money, Crowe said. 
   Harvey has assembled a high-profile project team of marketing, banking, insurance and construction professionals that includes Ret. Adm. James Loy, a former Coast Guard commandant and deputy secretary of Homeland Security, who is helping with regulatory compliance and government relations; Clark Kent Ervin, a former Department of Homeland Security inspector general, who notably advocated for 100-percent screening of air and ocean cargo while in office, works for the famous Louisiana-based lobbying firm of Patton Boggs and has the title of regional center counsel; port consultant John Vickerman; and several other lawyers and advisors, including UBS. 
   None of them, with the exception of Vickerman, appears to have any direct experience in the freight transportation or maritime industries.
   “Here’s the best news. It will not be built with public funding. It will be built with private funding from around the world, low-interest loans,” Crowe said Oct. 30 at an infrastructure development conference in Washington.
   Construction will take place in three phases and cost $1.3 billion to $1.4 billion, with the initial phase roughly projected to cost $400 million to $500 million, Crowe said in the phone interview, attributing the figures to Vickerman. Another $400 million would go toward the initial purchase of six brown-water vessels at a cost of about $55 million apiece. The EB-5 approval theoretically would allow $2.2 billion to be raised from foreign investors, which could be used for further expansion or additional vessel acquisition.
   But Vickerman said his analysis is for a 250-acre facility with four to five deep-water berths, breakwaters and slack-water berths for river shuttle vessels that would cost $1.3 billion for the initial phase.
   At $1.3 billion for the terminal alone, the development team would need to find 2,420 immigrant investors, absent any traditional investors, bank loans or government grants.
   A finance expert consulted about the EB-5 scenario, but who did not want to be named because of ongoing industry ties, said it’s possible that the foreign investment would be a stand-in for equity that developers normally put up themselves with the rest financed by debt, which might put the necessary immigrant contribution at about $200 million.
   Officials, however, expressed confidence that LIGTT Development Partners would raise most of the required financing through the EB-5 process. Harvey said EB-5 investment, which is preferred because it is cheaper, would be supplemented by loans from syndicate banks or private equity investment.
   ABK’s application is the largest ever submitted to USCIS for a regional center, with a projected investor pool of 3,400 individuals. The claim is plausible, but could not be confirmed by USCIS for privacy reasons.
   Investor response so far has been very positive, Crowe said.
   “Just last year when we were in Beijing at an EB-5 educational seminar we had over 150 people that were on a waiting list, so the interest level is extremely high” and ABK is aggressively marketing the project around the world, including in Russia, he said. “I have absolutely no doubt in my mind that they will be able to find the number of investors that we need.”
   Crowe stated that ABK’s estimates about new jobs are conservative and USCIS said the project could actually create 44,000 jobs in Louisiana, allowing the developers to bring in another 1,000 investors and raise an additional $500 million, for a total of $2.2 billion.
   The LIGTT developers plan to eventually spread their model up river, helping cities such as Cincinnati, St. Louis, Baton Rouge, Chicago and Memphis expand port infrastructure to receive container-on-barge traffic without having to take an equity position in the investment. Another 15,000 investors would contribute $7.5 billion on the assumption that 150,000 more jobs could be created in the nation’s heartland through the new waterborne distribution system, Crowe said.
   Under the concept, the group would agree to buy and install cranes and upgrade port facilities for 1 percent to 2 percent interest.
   The LIGTT port authority board ratified leases for the underwater rights and adjacent lands at its December meeting in Baton Rouge. The state, which has not committed any money of its own for the project, is leasing the land to the port authority, which in turn will sublease it to LIGTT Development Partners for 0.42 cents per square foot for 99 years, which comes to $1.9 million a year, John Hyatt, vice president of the LIGTT port authority board and an executive at New Orleans-based customs brokerage The Irwin Brown Co., said.
   Gov. Jindel last year signed legislation to increase the port’s footprint to 500 acres from the original plan to allow for finding the most suitable foundation point, but the acreage includes water areas. The wider scope is insurance in case the structure’s location has to be adjusted because of underwater obstructions.
   Hyatt said engineers might have to readjust the footprint depending on the proximity of sunken German U-boats, which patrolled outside the mouth of the Mississippi during World War II to torpedo military cargo vessels.
   The board has long-term authority to extend the facility across an additional 500 acres of shoreline, bringing the total area of the port to 1,000 acres.
   A final vote on the sublease was tentatively scheduled for late January.
   According to Harvey and Crowe, Louisiana officials initially planned to execute a concession agreement with investors to design, finance, build, and run the facility, but have since decided to take operating control of the facility once investors have been paid because of the potential profits that can be plowed into state coffers. Crowe said the port would contribute $75 million to the treasury in just its first year, with tax receipts rising in the future as volumes grow. The financing model will allow the state to gain a major asset without requiring any taxpayer funding, he said.  
   Most U.S. ports are primarily structured as economic development engines and don’t usually throw off much extra cash for the general fund or any trust funds. Any marginal surplus from lease payments and other revenue is usually plowed back into infrastructure and other capital expenditures to help businesses grow and create jobs. 
   “The plan at the moment, which is being negotiated, is to have the investors paid out so that the state can take full ownership and doesn’t have any of the liability,” Harvey said. Transferring the facility – either one berth at a time or all together – and using the port’s bonding capacity would allow more expensive construction capital to be replaced with less risky capital backed by actual operating revenues.
   Port revenues would ostensibly cover interest payments and bond retirement, but the interest rate would depend on the risk ratings agencies assign to the project for generating future earnings. Assuming Louisiana accepts responsibility for the port, it likely would agree to serve as a backstop for debt repayment if the port is unable to do so.
   Harvey said LIGTT Development Partners would turn over the berths about six months to a year after they become operational.
   LIGTT Development Partners will engage engineering and construction firms to build the facility under the oversight of the port authority. A request for proposals for a construction partner will be issued later in the pre-construction phase, Harvey said.
   According to Harvey and the project’s Website, the giant engineering firm Bechtel is managing the pre-construction phase. Hyatt said ABK Ventures is fronting the money for permits and preliminary site studies to get the project jumpstarted because it will take a while for the EB-5 funding pipeline to materialize.
   LIGTT recently received a permit from the Louisiana Department of Lands to take soil samples and conduct other engineering activity at the site, Crowe said in the interview.
   Industry experts not associated with the project say Bechtel’s involvement in technical feasibility work doesn’t signal anything about the merits of the project.
   Bechtel has been pushing the concept of “offshore hubs” in places such as Africa where the shallow coastal waters make it hugely expensive to develop ports for the mining industry at depths great enough to handle large drybulk ships. It says ore or coal can be shuttled to offshore terminals using barges. In Africa, Bechtel envisions steel or concrete structures being anchored to the seafloor where large ocean-going ships could tie up and receive cargo from barges that would bring material from a transfer point on the coast or along a river. The barges could be built to be suitable for both river and blue-water navigation, according to Bechtel.
   The company also sees potential for offshore terminals in the container industry, although doing so would probably require the construction of an artificial island or expansion of existing offshore land as was done with Yanshan terminal near Shanghai, China. Yangshan is connected to the mainland by a 20-mile bridge.
   In Abu Dhabi, Bechtel managed the planning, design and construction of the Khalifa Port, which includes a one-square-mile terminal located on an island three miles offshore and connected to the mainland by a causeway and bridge.
   Isaac E. Richardson III, Bechtel’s LIGTT project director, previously spent several months directing the expansion of a coal terminal in Brisbane, Australia, that included the construction of a 1.8-mile trestle into Dalrymple Bay and the infrastructure needed to transport the coal offshore. The project involved reclaiming land from the bay.
   Marco Pluijm, Bechtel’s senior ports specialist, alluded to LIGTT in an interview published in the November issue of American Shipper.
   A man-made island at the mouth of the Mississippi River to load post-Panamax containerships “would be extremely viable,” he said.
   Meanwhile, NaviForm Consulting and Research Ltd. of Vancouver, Canada, has been hired to design the self-propelled vessels with a nine-foot draft and capacity of 1,500 to 2,500 TEUs. The design is “incredible” and “practically a breakthrough. It should be a game changer,” the head of the firm said over the phone, while declining to speak in detail.
   The developers have also looked at designs for river self-loading/discharge vessels by Sweden’s Wärtsilä, according to Hyatt. 
   At the conference, Crowe defended the project’s economic viability, saying that it won’t be shackled by the difficulties maintaining the current 45-foot depth of the Mississippi River or deepening it to 50 feet, and that reports by the USCIS, the state of Louisiana and Vickerman all prove it can make money.
   “We are leaning towards as much automation as possible. To be able to make this work with really large ships, you need the speed of automation,” Harvey said, adding he assumed labor unions would go along with the plan because the hub-and-spoke operation would create more dock jobs at multiple ports.
     

Due Diligence.
   In an interview, Vickerman said LIGTT would attract incremental new volume that otherwise wouldn’t come to New Orleans and “the savings would be substantial.”
   But Asaf Ashar, co-director of the National Ports and Waterways Institute at the University of New Orleans, said he has not seen any serious market analysis that supports transshipment using a U.S. port. Two years ago, he and his colleagues recommended the state of Louisiana conduct a market study, and also consider a more modest option of a floating platform similar to ones in Europe that would primarily be geared to bulk commodities that predominate on the Mississippi.
   Vickerman has received testimonials from many clients for his past work, but he is also known for his aggressive forecasts that tend to discount negative data about a project’s potential, according to two port industry advisers who did not want to be identified talking about this project because of fear of jeopardizing current and future client relationships.
   A forecasting model based on market size and origin-destination distance is fine in certain circumstances, but an investment-grade analysis of a greenfield port should drill down to differentiate local and national cargo flows, demographics, commodity types, transit time, trip value and other factors, the source said.  
   The difficulty of getting strategic and financial investors behind a new Gulf container port is underscored by several concepts that never materialized. Sea Point, a venture by former shipping executive Jim Amoss for a floating transshipment dock 10 miles from the mouth of the Mississippi, has failed to take off after 13 years. In 2008, Amoss optimistically said he almost had the financing lined up and planned to start construction by the middle of the year.
   The state of Louisiana created the Millenium port authority after the turn of the century to build a large container port south of New Orleans, but it wasn’t able to put together the financing. And the Louisiana Transportation Center, a multimodal hub that was to include an airport, railroad terminal, trucking connections and a port on the Mississippi south of Baton Rouge, was intensively investigated at the instruction of the state legislature but eventually determined not to be economically feasible as a way to move large volumes of cargo.
   In 2008, the Port of Gulfport, Miss., considered a conceptual plan developed by consulting firm CH2M Hill for a $1 billion project that was supposed to give the port 2 million to 3 million TEUs of capacity, up from a modest 200,000 TEUs per year. 
   The project involved the creation of an offshore island using part of an existing finger pier and building up land with dredge material.
   Planners too envisioned big opportunities for capturing container traffic because of the Panama Canal expansion, increased trade opportunities with Latin America and Africa, and the U.S. demographic shift to the south.
   At the time, Gulfport officials said the project required a great deal of engineering and permitting work, but that it might be operational in four or five years.
   Mississippi committed to use $570 million from community bloc development grants from the U.S. Department of Housing and Urban Development awarded after Hurricane Katrina to help fund the expansion plan. That decision caused controversy among some legislators and community activists who felt the money should be used for residential construction.
   No private partners stepped up to develop the terminal and the project fell through.
   “It’s all thinking out of the box. We don’t know where it’s going to land,” Hyatt acknowledged, adding that no carriers or terminal operators have committed to LIGTT.
   Some of the claims made in a LIGTT Regional Center video on its Website seem exaggerated or at odds with the general consensus among freight industry analysts about global trade patterns and supply chain economics. 
   The video, for example, justifies the need for a new port in Louisiana and increased use of inland waters to move freight on the grounds that Americans spend an enormous amount of time in traffic congestion because of too much inland freight movement by truck and rail from the ports of New York/New Jersey and Los Angeles. It also raises the specter of port congestion becoming so bad with the projected increase in trade volume that vessels will be stuck outside harbors for days and weeks waiting for berth space, which will disrupt supply chains. Officials say the shallow-draft feeder vessels will relieve pressure on other surface modes.
    One surprising scenario presented on the video shows shippers on both coasts of South America exporting goods through the LIGTT and up the Mississippi River system, to ports in western Canada for transfer to vessels bound for Shanghai, rather than utilizing all-water ocean routes.
   The video errs when it says that large vessels calling on “Freeport, Jamaica” could instead utilize LIGTT. The main port in Jamaica is Kingston. Freeport is a transshipment terminal in the Bahamas.
   Inland waterways are heavily used for bulk transport of commodities such as coal, oil and grain, but containerized barge transportation has not taken root in the United States because of the lack of specialized infrastructure for handling land-to-water transfers and unease among retailers and manufacturers that marine highways are a much slower delivery mode than truck and rail.
   And while the U.S. Maritime Administration has pushed the concept of “marine highways” for more than a decade, the fact is that the inland waterway system is deteriorating because of inadequate funding from Congress for the Army Corps of Engineers.
   A majority of locks and dams on the Ohio, Mississippi and other rivers are older than 50 years and unscheduled closures because of mechanical failures have tripled, according to the United Soybean Board. The Army Corps also faces a backlog of jetty maintenance and dredging. Sediment buildup on the Lower Mississippi, for example, often restricts when vessels can operate, creating shipping delays. And severe drought the past two years has also lowered the water level and made some sections of the Mississippi unnavigable for a while. Shippers are worried about the potential of a catastrophic failure that could cut off river traffic for a long period. The special craft conceived by the LIGTT team could avoid some of the draft restrictions faced by oceangoing vessels, but still would be subject to the same delays as tow boats and barges further up the Mississippi River and its tributaries.
   The video says the project could be completed before 2014, in time for the completion of a new set of wider locks for big vessels at the Panama Canal in late-2015. The claim is without merit because huge public and public-private infrastructure projects of a similar nature typically take more than a dozen years from planning to construction to complete. The project still faces engineering work, a lengthy environmental impact study, and multiple permitting processes involving local, state and federal agencies, including the Coast Guard and Army Corps before the first shovel is raised. 
   Elsewhere in its presentation materials, the developer ambitiously envisions the LIGTT project taking five years to complete over several phases. 
   Harvey said the pre-construction phase could take a year to 18 months to complete, with Crowe adding, “we feel comfortable that we could have at least Phase 1 completed” by 2016. The entire build-out schedule is less than 10 years, he said.
   LIGTT and Bechtel are arranging the environmental studies, permits, design engineering and procurement concurrently, instead of pursuing approvals and design work in linear fashion the way most bureaucracies do, Harvey said. Involving agencies such as the Army Corps from the beginning will allow any concerns to be addressed as they occur instead of waiting until the approval process is complete.
   “So instead of going back and forth, you do this all at once. That’s a mistake that other governments make. As a private developer, we can pursue multiple paths at the same time, which allows us to move at a different speed,” Harvey said.
   That’s what APM Terminals was able to do last decade when it built the largest privately owned container terminal in the United States at Portsmouth, Va., adjacent to the public Port of Virginia, in six years. That three-berth facility by comparison was built on 290 acres of farmland at a cost of about $500 million. The company worked closely with local, state and federal agencies in charge of permits, environmental reviews and building the highway access. It also paid $40 million of its own money to dredge the river channel and berths to 50-feet and beyond instead of waiting for federal funding.
   (APMT subsequently leased the terminal to the Virginia Port Authority for 17 years because it was having trouble getting enough volume on its own.)
   LIGTT developers promise to create 35,000 direct jobs and offer extensive job and training opportunities for military veterans.
   The marketing casts LIGTT as a special homeland security asset because high-tech equipment for detection of weapons of mass destruction could screen containers upon arrival and house the Coast Guard.
   “In support of the U.S. Department of Homeland Security’s goal of ultimately screening 100 percent of all cargo entering the country, the terminal has set its own goal to have all arriving containers electronically screened by DHS,” the press release said.
   LIGTT plans to physically scan every container, Harvey said.
   The statement could raise eyebrows because 100-percent inspection regimes have been widely discredited as a credible security option and are strongly opposed by the maritime industry and foreign governments. In fact, DHS has steadfastly rejected adopting any policy of scanning all inbound containers with X-ray equipment because it would disrupt trade and be prohibitively expensive.  Meanwhile, its component agency, Customs and Border Protection, as a matter of routine, sifts through all cargo manifests and other advance shipping data as part of its risk management approach to detecting potential threats. And, CBP already operates radiation portal monitors at all commercial ports through which every container passes upon egress, as well as non-intrusive imaging machines to inspect the interior of containers identified through random selection or because of suspicious information gleaned from shipping documents. A Customs and Coast Guard presence on the site would be standard operating procedures for those, and other, agencies.
   Harvey compared the for-profit security model to one tested, but never adopted, at Hong Kong International Terminals, where Hutchison Port Holdings set up an integrated scanning system of container-penetrating X-ray machines, radiation detection monitors and optical character readers to capture the container ID number as ocean boxes were slowly driven into the facility or shuttled off a barge without requiring a separate stop at a designated staging area. Under the concept, the system would upload the images to customs agencies for review. HIT officials several years ago said they wanted to collect a surcharge of about $6.50 per box to cover the expense of the service.


The Pencil Test.
LIGTT faces a host of hurdles and associated expenses that could drive up the cost of providing container handling service beyond what the market will bear. 
   For example, LIGTT will not have road or rail access. Ocean vessels will drop and pick up cargo on the deep-water side and stevedores will make the transfer to and from the shuttle side. In the initial phase, the terminal operator may purchase underutilized Gottwald mobile harbor cranes in Louisiana that primarily lift breakbulk commodities along the river, and use them until permanent ship-to-shore cranes are installed, Hyatt said.
   Transferring cargo to smaller, feeder vessels instead of making a direct port call means extra costs for labor, time, and handling fees. American dock workers are among the highest paid in the maritime industry. The same costs associated with double-handling cargo are incurred at offshore transshipment ports in the southern hemisphere, but their cost structure is much lower because of the difference in American labor rates.
   Stevedoring rates range from $70 to $90 per container in the Caribbean, so a U.S. facility would need comparable handling fees to compete, Martin, the port expert, said.
   Terminal operators carrying out transshipment are also squeezed on the revenue side because there is so much competition that they can usually only secure rates that are about 50 to 60 percent of moves through an import/export gateway, making it even more important that the extra step be at the lowest possible cost, Brad Julian, principal at Julian Associates in Annapolis, Md., speaking in general about the industry, said.
   “It’s very difficult to get the labor costs down to the point where you can get the transshipment costs viable. So the business case becomes pretty difficult to prove out for traditional investment requirements” in most cases, the former APM Terminals executive said.
   Transshipment operations make economic sense if they can leverage existing infrastructure built to serve a strong local market and the facility is annually capturing upwards of 750,000 TEUs for transshipment on its own, he explained.
   “Then transshipment can come in and top off the business, which allows an operator to competitively price the transshipment,” because the margins wouldn’t have to cover the sunk infrastructure costs, only the incremental cost for labor, utilities and extra equipment maintenance, said Julian, who provides management and financial advice to port authorities, carriers, terminal operators, investors and developers.
   The trick, Julian explained, is not to have too much transshipment business so a terminal can earn incremental profit without incurring additional capital expenditures for equipment and infrastructure to maintain capacity, “which can start to erode your returns pretty quickly.”
   A big factor in determining a terminal’s throughput is the dwell-time for containers and whether the boxes will be able to make direct connections or have to go in the yard to wait.
   Major transshipment ports, such as Singapore and Tanger Med in Morocco, typically unload boxes from a vessel, stack them in a yard and reload them onto the second vessel. Vessel-to-vessel exchanges are rare because it is very difficult to perfectly time the schedules of deep-sea vessels with smaller vessels or barges, Julian said. An operator might need to add more shuttle vessels to the fleet to ensure service frequency lines up with the arrival of mother ships, he added.
   The goal of fully automating operations may be difficult to achieve too because there is only one semi-automated terminal in the United States to date, in part because the power of longshoremen’s unions.
   Cargo going through a Gulf transshipment terminal would need transit times to the Midwest market comparable to those of Savannah, Miami, Baltimore, Norfolk and New York/New Jersey that receive all-water service via the Panama and Suez canals, or the transcontinental intermodal service from West Coast ports, Martin said.
   The only way that might be possible is if the brown-water vessels made dedicated calls to a single river terminal each trip, he suggested.
   “You just can’t be making multiple stops along the way because your transit times would become unbearable,” Martin said.
   In addition to delays due to the slowness of river transport and double-handling at a gateway port, barge distribution would require containers to be lifted a third time at an inland port and the development of new chassis pools and yards where short-haul truckers can get equipment to lay the container on for transport to a distribution center, he said.
   Most existing inland chassis pools are set up near intermodal rail ramps.
  “There’s a law of logistics that make this a very difficult concept,” he said.
  The inland logistics piece is one of the reasons that FastShip never got off the ground, Martin pointed out.
   FastShip Inc., which proposed building high-speed containerships that would shuttle between Philadelphia and Cherbourg, France, as an alternative to air freight, filed for bankruptcy protection in early 2012 after being unable to raise the necessary capital to launch the business plan.
   Also complicating matters for LIGTT is the Jones Act governing the shuttle vessels. Under the 1920s-era law, vessels moving cargo between two U.S. points must be built in U.S. shipyards, registered in the United States and crewed by Americans. U.S. shipyards are about four-times as expensive as some of their foreign counterparts; stricter regulations to comply with U.S. employment, safety, environmental and security laws add to operating costs for U.S.-flag vessels; and American seafarers command much higher rates than most international sailors. Many groups want to open maritime services to foreign competition, but the domestic carriers say the law is necessary to preserve a vital domestic industry that supports national security.
   The Jones Act is one reason that transshipment facilities have not taken hold in Puerto Rico, Julian said.
   “The Jones Act is in our favor. It enhances our business model,” Harvey, who appeared to have misinterpreted the law’s meaning, said. “Right now you [an international ocean carrier] are only allowed to make one port of call unless you’re a U.S.-flag ship. If you drop the cargo at a hub, three different vessels can come in and pick up right from the terminal.”
   Foreign vessels actually are allowed to make multiple stops in the United States, but can’t transfer domestic cargo, which includes cargo offloaded from an international voyage.
   U.S. transshipment hubs are not feasible because the cost of transshipment is more than twice that of Caribbean and Canadian ports and cost of foreign feeder vessels is about one half of domestic feeders, Ashar argued. 
    Ashar of the University of New Orleans, who believes U.S. policymakers should rethink whether dredging ports to accommodate 12,000-TEU and larger vessels is worthwhile anymore when offshore hub-and-spoke services in the Caribbean, Panama and Canada (for Suez transits) might work better than direct calls to East Coast ports, said LIGTT’s 70-foot natural depth is “not sufficient to justify an investment of more than $1 billion.”
   Another regulatory impediment is the federal government’s Harbor Maintenance Tax, which is imposed on all shippers based on the value of goods being shipped through U.S. ports. It applies to imports, as well as domestic shipments between ports. That means any transshipments on U.S. territory would be subject to a double tax.
   The terminal’s isolation poses further challenges with operational staffing. Workers would have to be periodically shuttled to the site, much like crews who rotate tours of duty on offshore oil rigs. The port would feature extensive living quarters, according to promotional materials, but the transport and housing requirements would further add to the capital and operating costs compared to ports in, or near, cities.
   Another possibility, Hyatt said, is to build hotel-type facilities in nearby Venice. 
   Meanwhile, the state of Louisiana must still evaluate whether a port at the mouth of the Mississippi would cannibalize cargo already headed to the Port of New Orleans, 100 miles upriver. New Orleans is the second largest port in the United States in terms of tonnage, a testament to the large amounts of bulk products it handles for exports, but is not a big player in the container business. The port authority is in the second phase of expanding its Napoleon Ave. Container Terminal, which will nearly triple capacity to more than 1.5 million TEUs when fully completed at a cost of several hundred million dollars. But it is constrained from receiving 7,500-TEU ships because of two bridges that cross the Mississippi south of the city.
   Policymakers must decide whether to continue investing resources in a public port when a private developer could duplicate or supersede the effort.
   There has also been some discussion, Hyatt said, of LIGTT being an offshore bunkering platform where Cape-size bulk vessels could fuel up all the way, allowing them to take on more export cargo for the river transit.

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   “If they’re able to find financing it would be quite an engineering feat. I’m not in a position to judge whether it’s economically feasible. Essentially the market place will determine if this is the best way to move containers in and out of the United States,” Joe Accardo, executive director of the Ports Association of Louisiana, said. “We welcome the effort.”
   Questioned by a reporter at the October infrastructure conference in Washington, Crowe said his group has an agreement to provide $300 million to New Orleans to beef up its infrastructure to handle the extra cargo that will be funneled its way by LIGTT.
   “This project is actually designed, in a sense, to save the business we have now at the Port of New Orleans and grow that business, and not just at the Port of New Orleans, but further up the river,” he said.
   Gary LaGrange, port director in New Orleans, declined through a spokesman to comment on the LIGTT project.
   Vickerman, who just finished a strategic port master plan for Plaquemine Parish, said in an interview that transshipment sites like LIGTT would need upriver facilities to optimize their cargo. “So it doesn’t strip that capability away, in fact it may increase that volume depending on the size of ships,” he said.
   Plaquemine straddles the Mississippi River between the Gulf and New Orleans and has rail access within six miles of a proposed new port location.
   “Plaquemines could serve as a distribution center for those cargoes. In fact, my work indicates there is an opportunity for Plaquemines Parish to become the gateway for distribution to the central U.S. heartland,” Vickerman said.

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