Executive Briefings

Big Ships, Small Infrastructure: A Recipe for Disaster

By the time you read this, the largest containership ever to call a U.S. port will have visited the ports of Los Angeles and Oakland. It won't be the last. But will regulation and environmental pressures prevent carriers from developing the infrastructure needed to handle these seagoing behemoths?

Big Ships, Small Infrastructure: A Recipe for Disaster

Scheduled to call Los Angeles on December 26 and Oakland on the 31st, the CMA CGM Benjamin Franklin has a capacity of 18,000 twenty-foot equivalent units (TEU). A single visit by a ship of this size dumps huge numbers of containers into the dockyard, railyard and intermodal facilities all at one time. The potential for system bottlenecks - even paralysis - is immense. Assuming they even have adequate water depth at their berths, most ports in the world lack the backlands and support infrastructure to manage those periodic surges of volume.

Carriers aren’t blind to the consequences. CMA CGM said it’s “working closely” with the ports of Los Angeles and Oakland to ensure that they can handle the Benjamin Franklin, which will be deployed in regular service between China and the U.S. West Coast. The line intends to cooperate with other eligible ports “as they begin similar assessments of their infrastructure.”

But how free are ports and other transportation facilities to make the necessary changes? If you listen to Jock O’Connell, international trade advisor with Beacon Economics, you might wonder. He believes that regulation and litigation have the potential to delay or halt vital expansion projects. In fact, he says, that’s already happening.

The advent of the big new ships came “with incredible swiftness,” he said at the recent Cargo Logistics America conference in San Diego. Back in 2005, industry consensus on the optimal size for a containership was 10,000 TEU. Soon after, Maersk Line upped the ante with its 18,000-plus TEU Triple E ships. Now Maersk and MOL and OOCL have placed orders for 20,000-TEU vessels, and a 22,000-TEU model is in development.

Whether ships of that size make economic sense for the carriers is a question for another day. But the issue they raise in the short term is the alarming lack of portside and land facilities to cope with them. Intermodal operations will be especially affected, given that many containers carried by the largest containerships will be destined for inland points, and rail is the best option for getting them there.

O’Connell cited efforts by the BNSF Railway to construct the Southern California International Gateway (SCIG) facility close to the port of Los Angeles. The railroad says the replacement for an older intermodal facility will remove large amounts of truck traffic from streets and freeways. It will eliminate the need to truck containers 25 miles to BNSF’s Los Angeles Intermodal Facility, also known as the Hobart Railyard.

Lawsuits against the $500m project have resulted in protracted delays and escalating development costs. Complainants include the Natural Resources Defense Council, South Coast Air Quality Management District and, ironically, the City of Long Beach. They charge that BNSF has overstated the environmental benefits of the project, and that it will actually result in more pollution in local neighborhoods, caused by a surge of trucks moving containers to the railhead.

A final court decision on the complaints likely won’t come until April of 2016. Meanwhile, said O’Connell, the dispute has set the project back by approximately 10 years.

The project “could have been beneficial to environmental quality in the Los Angeles Basin,” he said, “but because it has an environmental impact on a neighborhood adjacent to this rail facility, it’s been held up.”

The controversy raises the question of how to balance competing interests. Assume that a project the scale of SCIG will indeed increase emissions in adjacent neighborhoods. But what if the net impact of the facility is less pollution in Southern California, or the country as a whole? How should regulators approach such a question?

Fran Inman, senior vice president of Majestic Realty Co. and a member of the California Transportation Commission, said at the Cargo Logistics conference that compromises are often necessary. CTC staff has been working on the BNSF project for a decade, she added. “The fact that we haven’t been able to figure it out is a huge challenge for all of us.”

In retrospect, Inman suspects that all involved parties could have found a solution that would have kept the matter out of the courts. “For the time and resources we spent,” she said, “we probably could have done better.”

Mike Christensen, senior executive lead for supply chain optimization at the Port of Long Beach, said issues of competing priorities arise frequently. The BNSF matter, he added, “has become way more litigious than we’d like to see. When you look at decades of delay, it’s not a good thing. We have to figure out a way to change that.”

O’Connell worries that regulatory and legal obstacles could stymie critical projects in the future – even those involving recovery from a natural disaster. Imagine a tsunami that devastates the Los Angeles area, he said. In a worst-case scenario, regulatory agencies such as the California Air Resources Board could prevent a rebuilding of the ports.

Environmental concerns are, of course, of paramount importance where any major commercial development is involved. The recently announcement of a multi-nation carbon-reduction agreement at the COP21 climate talks in Paris is evidence of that. Surely, though, there’s a need for balancing the environmental implications of any development, both local and national, with the absolute necessity to accommodate the tidal wave of cargo that’s coming to U.S. shores.

Next: The regulators speak.

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Scheduled to call Los Angeles on December 26 and Oakland on the 31st, the CMA CGM Benjamin Franklin has a capacity of 18,000 twenty-foot equivalent units (TEU). A single visit by a ship of this size dumps huge numbers of containers into the dockyard, railyard and intermodal facilities all at one time. The potential for system bottlenecks - even paralysis - is immense. Assuming they even have adequate water depth at their berths, most ports in the world lack the backlands and support infrastructure to manage those periodic surges of volume.

Carriers aren’t blind to the consequences. CMA CGM said it’s “working closely” with the ports of Los Angeles and Oakland to ensure that they can handle the Benjamin Franklin, which will be deployed in regular service between China and the U.S. West Coast. The line intends to cooperate with other eligible ports “as they begin similar assessments of their infrastructure.”

But how free are ports and other transportation facilities to make the necessary changes? If you listen to Jock O’Connell, international trade advisor with Beacon Economics, you might wonder. He believes that regulation and litigation have the potential to delay or halt vital expansion projects. In fact, he says, that’s already happening.

The advent of the big new ships came “with incredible swiftness,” he said at the recent Cargo Logistics America conference in San Diego. Back in 2005, industry consensus on the optimal size for a containership was 10,000 TEU. Soon after, Maersk Line upped the ante with its 18,000-plus TEU Triple E ships. Now Maersk and MOL and OOCL have placed orders for 20,000-TEU vessels, and a 22,000-TEU model is in development.

Whether ships of that size make economic sense for the carriers is a question for another day. But the issue they raise in the short term is the alarming lack of portside and land facilities to cope with them. Intermodal operations will be especially affected, given that many containers carried by the largest containerships will be destined for inland points, and rail is the best option for getting them there.

O’Connell cited efforts by the BNSF Railway to construct the Southern California International Gateway (SCIG) facility close to the port of Los Angeles. The railroad says the replacement for an older intermodal facility will remove large amounts of truck traffic from streets and freeways. It will eliminate the need to truck containers 25 miles to BNSF’s Los Angeles Intermodal Facility, also known as the Hobart Railyard.

Lawsuits against the $500m project have resulted in protracted delays and escalating development costs. Complainants include the Natural Resources Defense Council, South Coast Air Quality Management District and, ironically, the City of Long Beach. They charge that BNSF has overstated the environmental benefits of the project, and that it will actually result in more pollution in local neighborhoods, caused by a surge of trucks moving containers to the railhead.

A final court decision on the complaints likely won’t come until April of 2016. Meanwhile, said O’Connell, the dispute has set the project back by approximately 10 years.

The project “could have been beneficial to environmental quality in the Los Angeles Basin,” he said, “but because it has an environmental impact on a neighborhood adjacent to this rail facility, it’s been held up.”

The controversy raises the question of how to balance competing interests. Assume that a project the scale of SCIG will indeed increase emissions in adjacent neighborhoods. But what if the net impact of the facility is less pollution in Southern California, or the country as a whole? How should regulators approach such a question?

Fran Inman, senior vice president of Majestic Realty Co. and a member of the California Transportation Commission, said at the Cargo Logistics conference that compromises are often necessary. CTC staff has been working on the BNSF project for a decade, she added. “The fact that we haven’t been able to figure it out is a huge challenge for all of us.”

In retrospect, Inman suspects that all involved parties could have found a solution that would have kept the matter out of the courts. “For the time and resources we spent,” she said, “we probably could have done better.”

Mike Christensen, senior executive lead for supply chain optimization at the Port of Long Beach, said issues of competing priorities arise frequently. The BNSF matter, he added, “has become way more litigious than we’d like to see. When you look at decades of delay, it’s not a good thing. We have to figure out a way to change that.”

O’Connell worries that regulatory and legal obstacles could stymie critical projects in the future – even those involving recovery from a natural disaster. Imagine a tsunami that devastates the Los Angeles area, he said. In a worst-case scenario, regulatory agencies such as the California Air Resources Board could prevent a rebuilding of the ports.

Environmental concerns are, of course, of paramount importance where any major commercial development is involved. The recently announcement of a multi-nation carbon-reduction agreement at the COP21 climate talks in Paris is evidence of that. Surely, though, there’s a need for balancing the environmental implications of any development, both local and national, with the absolute necessity to accommodate the tidal wave of cargo that’s coming to U.S. shores.

Next: The regulators speak.

Comment on This Article

Big Ships, Small Infrastructure: A Recipe for Disaster