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American ShipperIntermodal

Right of way

Right of way

MarAd gives green light to select marine highway projects.



By Chris Dupin


   Increasing general cargo volumes via short sea shipping, moving along the U.S. coasts or on inland waterways, has been long discussed.

   The Obama administration has been a proponent of the concept, using the term 'marine highway,' which was popularized by the Maritime Administration under President Bush.

   In August, the Transportation Department and MarAd designated several coastal areas and inland waterways as 'marine highway corridors,' and named eight projects eligible to compete for $7 million in funds to be allocated in the fiscal year ended Sept. 30.

   While that's a modest amount of money for some ambitious projects, advocates see the grants as a promising recognition of what they hope will become an important part of the U.S. transportation infrastructure.

   The August announcement resulted from the Energy Independence and Security Act of 2007, which directed the transportation secretary to 'designate short sea transportation routes as extensions of the surface transportation system to focus public and private efforts to use the waterways to relieve landside congestion along coastal corridors.'

   'I think this is terrific. We are looking forward to a program and a policy being established. That started with the 2007-2009 legislation. Now we have the first round of projects that have been reviewed and judged and grants that will flow,' said Paul H. Bea Jr., chairman of the Coastwise Coalition, a group advocating marine highway projects.

Bea

   'This all represents a step toward what will be an active part of transportation policy and programs. It's a small start, and I'm not going to overstate it, but it is an important start,' Bea said.

   While the fiscal year 2011 budget does not have funding for marine highway projects, Bea was hopeful the 2012 budget would.

   One of the encouraging aspects of the program, he said, was the decision to include all sorts of marine projects ' passenger and cargo; long, medium and short-distance services; inland and coastal.

   In addition to choosing the eight projects as eligible to bid for the limited grant money, MarAd also singled out a half-dozen other projects as initiatives that it said were 'not to the point of proposing specific services and routes,' but 'offer promise of potential in the future.'

   'I'm very pleased that there is some real action going on and that some money is going to come forward,' agreed Mark Yonge, a managing member of Maritime Transport & Logistics Advisors and vice chairman of the Marine Highways Cooperative.

   Transportation Secretary Ray LaHood 'has been strongly behind marine highways and he has really stuck to it,' Yonge said.

Younge

   He pointed to an August entry in LaHood's 'Fastlane' blog that argued, 'making better use of our rivers and coastal routes offers an intelligent way to relieve some of the biggest challenges we face in transportation ' roadway congestion, climate change, fossil fuel energy use, and soaring road maintenance costs. There is no better time for us to improve the use of our rivers and coasts for transportation.'

   'For a few hundred million dollars, which is a pittance against what the highway fund ' you could build a lot of marine highways and you don't have to maintain them,' said Yonge, adding the money should not come from the highway fund. Replacement tonnage for an initial fleet could be funded out of earnings, he added.

   DOT selected corridors along the West, East and Gulf coasts, the Great Lakes and many of America's inland waterways. They were given numbers much like interstate highways. The new M-5, M-10 and M-95, for example, roughly parallel the coastal highways Interstate 5, I-10 and I-95. There are 11 such corridors, as well as four 'connectors,' which it sees as feeder routes to the corridors; and three 'crossings,' which are short routes across harbors or waterways that are alternatives to much longer or less convenient land routes.

   Maritime Administrator David Matsuda said the eight projects were selected to compete for the $7 million and could reduce gridlock, improve the environment, and put mariners and shipbuilders to work.

   The projects are:

   ' Upgrade three passenger and vehicle ferries operating between New London, Conn., and Orient Point, N.Y.

   ' Expand a container-on-barge service connecting Newark, N.J.; Boston; and Portland, Maine. Ironically, Columbia Coastal reportedly decided to discontinue that 20-year-old service just days after MarAd's announcement because of falling demand.

   ' Increase the frequency and capacity of SeaBridge Freight's container and breakbulk barge service between Brownsville, Texas, and Port Manatee, Fla.

   ' Start a container-on-barge service along the Tennessee-Tombigbee Waterway between Mobile, Ala., and northern Mississippi.

   ' Build a fleet of containerships to move containers along the Gulf and East coasts. The plan, proposed by American Feeder Lines, is sponsored by the ports of Galveston and Charleston.

   ' Start a commuter passenger ferry between Detroit and Windsor, Ontario.

   ' Expand the quality and capacity of a rail ferry in New York harbor connecting the Greenville Rail Terminal in Jersey City, N.J., with Brooklyn, N.Y.

   ' Expand a container-on-barge service between Hampton Roads and Richmond, Va.

   Five of the eight projects selected by MarAd were existing services, three were new.

   'We have the demonstrable results to show that the marine highway can achieve some of those national imperatives ' reducing fuel consumption, removing traffic from coastal highways, lowering emissions and making the roadways safer,' said Hank Hoffman, president of SeaBridge Freight.

   'As a veteran of the trucking industry, that should not be perceived that we are anti-truck. Quite the contrary, we believe that some of the best partners we have and will have in the future will be trucking companies,' Hoffman said. While SeaBridge has some direct shippers as customers, he said the vast majority are third-party logistics providers, intermodal carriers and trucking companies.

   He said his company would like to double its 10-day frequency by adding a second barge.

   The most ambitious of the eight projects MarAd singled out was that of American Feeder Lines (AFL), which sees growing opportunities to move international and domestic containers along the coast.

   The company said it has letters of intent with two U.S. shipyards to build 10 containerships with 1,300 TEUs capacity each ' five at Bay Shipbuilding in Wisconsin and five at Aker Philadelphia Shipyard in Pennsylvania.

   The company said the vessels would be lift-on/lift-off, capable of carrying international containers and 53-foot domestic boxes.

   Tobias K'nig, a German shipping investor, and Percy R. Pyne IV, his partner in New York-based commercial real estate company K'nig Pyne & Cie, are the principal backers of the AFL project.

   K'nig's Hamburg-based company, K'nig & Cie, has financed more than 100 vessels and has a fleet of 68 ships on the water and nine vessels under construction.

   AFL has engaged investment bank Seabury Group to help it raise private equity for the project. But K'nig believes AFL 'can't be done all with private money,' and said he will look for government assistance.

   Under the Jones Act, ships that move cargo between domestic ports must be built and registered in the United States, and employ U.S. seafarers. That increases the cost of building and crewing U.S. vessels, though many consultants said they were surprised at the $75 million-per-ship price K'nig said he has been able to negotiate.

   K'nig said there would be opportunities arising from the expanded Panama Canal, as cargo arriving at selected deepwater U.S. ports could be feedered to and from other ports that can accommodate only smaller vessels.

   But there are big opportunities to move domestic containers as well, he added.

      'The problem in the U.S. is that the situation is at a gridlock. The existing infrastructure is broken, cannot be maintained at the cost that has been budgeted because prices are much higher today and there is no chance you can put more growth on roads and rail capacity is very limited,' K'nig said. 'If things continue to grow in the U.S., you need another mode of transportation.'

   Given the $750 million it needs to build its fleet, K'nig did not expect to be awarded part of the $7 million 'because it doesn't really get us anywhere.' But he said AFL's recognition by MarAd was a 'milestone' in advancing its coastal shipping project.

   But the money could be significant for other projects, such as the proposal to start a barge service between Mobile and several ports in northern Mississippi including Port Itawamba.

   Itawamba Port Director Greg Deakle said the barge service could provide an all-water alternative to shippers who today move about 220,000 TEUs of furniture, mostly from the Far East to West Coast ports and then by rail to Memphis, Tenn.

   Instead, some of that cargo could be moved by ship to Mobile, then barged to northern Mississippi, he said, reducing shipping costs by about 10 percent to 20 percent, and spreading traffic to several ports instead of funneling all that traffic through Memphis.

   He said there are other shippers in the region that could benefit from the service, including a Toyota assembly plant in Blue Springs, Miss., about 24 miles from Port Itawamba.

   'Everything is chicken-and-egg ' no one wants to sign onto a service that doesn't exist yet and you can't start the service unless someone is willing to sign on,' Deakle said. A MarAd grant could be 'what cracks the eggs and lets us start cooking.'

   The MarAd program requires shippers to supply a 20 percent matching contribution, and Deakle said he had originally asked for about $1.7 million to offset the cost of a barge and start a pilot program, which he would like to see run at least three years.

   He also said that his company has been looking at other opportunities, for example, speaking with SeaBridge about interlining cargo with its existing cross-Gulf service.

   Another new service that MarAd said would be eligible to compete for funding has been proposed by the Detroit-Wayne County Port Authority.

   A successful cargo ferry is used to move trucks carrying hazardous cargo between the two cities, but John K. Kerr, director of economic development for the port, said it has proposed a separate passenger ferry between Windsor and a port location in downtown Detroit near the General Motors Renaissance Center.

   He said there are about 4,000 nurses that commute from their homes in Canada to work in Detroit each day, and the port sees them as forming a base of users for the service. But he said the ferry might also be used by tourists and many other residents of the two cities who might want to avoid driving.

   The port envisions a port authority-owned service with a private owner, or potentially a service with dual public-private ownership.

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