Things were relatively quiet on the transportation infrastructure front for several years. Then a bridge collapsed.
The August 1, 2007 failure of the Interstate 35-West bridge, spanning the Mississippi River at Minneapolis, Minn., involved some 100 vehicles and caused at least 13 deaths. The disaster focused public attention on the nation's crumbling system of bridges, tunnels and roads. For commercial freight interests, it was yet another warning about the inadequacy of the whole transportation network, stretching to rail lines, ports and marine terminals.
In recent years, the issue hasn't exactly been front and center for supply chain executives. Not, at least, since the fall of 2002, when a dock-management lockout brought operations at U.S. West Coast ports to a halt for 11 days. A resulting backlog in the unloading of ships caused huge delays in the movement of goods to market, especially during the crucial Christmas shopping season. Further hampering operations around that time was an unexpected surge in the volume of goods from Asia, caused by companies outsourcing their manufacturing to China and other low-cost countries in the region. Effects of the one-two punch were felt for months afterward, especially at points where freight containers are shifted from one mode to another.
Since that time, congestion has alleviated somewhat, thanks to slower growth in trans-Pacific cargoes and the use of alternative routing by carriers. But shippers still experience delays during peak seasons. And occasional disasters like the I-35W bridge collapse serve as reminders that the problem of outdated infrastructure isn't going away anytime soon. On the contrary, continued growth in international trade, coupled with a failure to maintain, let alone expand, the nation's highway system, ensures that another crisis will occur. The only question is when.
"It's a substantial issue, and it's going to become an increasingly large one, as freight volumes grow and the economy increases," says C. Randal Mullett, vice president of government relations with Con-way Inc. "It doesn't take more than a cursory look at federal highways, motor carrier numbers and freight projections to really kind of scare you."
Collapsing bridges might put the issue in the public eye, but not necessarily in a way that helps freight. Mullett says most of the attention being paid to road congestion today is focused on commuter traffic. Moreover, sensational incidents such as the bridge failure tend to obscure the deeper issue of inadequate system capacity.
Every discussion about infrastructure will quickly devolve into a conversation about money. The halcyon days of massive government expenditures on infrastructure - the kind that built the interstate highway system in the 1950s - are long gone. But policymakers haven't done a very good job of smoothing the way for private money to enter the picture, says Mullett. Private funds are being invested, but mostly on a local basis, with no coherent national vision.
Mullett says the U.S. Department of Transportation needs to set up "a realistic framework" by which private money could be funneled into "meaningful projects" on a nationwide basis. At stake is continued expansion of the U.S. economy. "You cannot decouple economic growth from growth in transportation and freight," Mullett says.
The idea of private investment in transportation resources is a controversial one, since it often leads to revenue-recovery plans such as new or higher tolls for roads and bridges. U.S. Transportation Secretary Mary E. Peters drew flak recently for her issuance of $848m in grant money to five U.S. cities for setting up variable systems for assessing tolls, depending on traffic volumes and time of day.
The goal is to reduce congestion, Peters said, but critics charge the federal government hasn't done enough to spend public money that was supposed to go to transportation projects. Peters herself has said that up to 40 percent of money in the Highway Trust Fund, generated through fuel taxes, is diverted into projects that aren't related to highways or bridges. As a result, says Mullett, "we have under-invested in these areas relative to the rest of the world, historical percentages and our own needs."
On the Waterfront
For shippers, some of the worst congestion occurs at locations with the lowest public profile: the waterfront. They are still haunted by the image of dozens of containerships lying at anchorage at West Coast ports in 2002, waiting for a chance to unload their valuable cargoes. And while that particular crisis has passed, the arrival of ever-larger containerships, carrying 6,000 or more 40-foot containers, promises to put an even greater strain on berth and container yard capacity.
Additional headaches occur once a container hits the terminal. From there, it must either be picked up by a truck or drayed to a nearby railyard for intermodal movement into the interior. Each option carries its own set of problems. Truckers can sit at the gate for hours, waiting to pick up one out of thousands of containers being offloaded from the ship. Rail transfers often occur within limited space at the port, and involve the painstaking assembly of trains that are more than a mile long.
One of the biggest issues affecting ports today is a lack of room for growth. Gone are the days when the ports of Los Angeles or Long Beach could order up hundreds of acres of additional space for container terminals simply by filling in portions of the harbor. Limited opportunities for landfill still exist, says Mike DiBernardo, director of marketing with the Port of Los Angeles, but most of the space for future expansion will have to come from reshuffling existing parcels and converting non-container operations.
Even the world's most productive marine terminal still must link smoothly to inland modes of transportation, often in crowded urban areas. DiBernardo says a number of projects to improve such hand-offs are underway at the Port of L.A., including grade separations along rail lines, better-designed offramps from freeways into terminals, and eventual replacement of the 40-year-old Gerald Desmond Bridge, which links the mainland with Terminal Island.
As for intermodal facilities, the port has implemented on-dock railyards at all of its container terminals but one - the TraPac facility serving Mitsui O.S.K. Lines Ltd. And L.A. intends to remedy that oversight; it hopes to certify an environmental impact report in November that would clear the way for expansion of the TraPac terminal and the addition of rail tracks at the docks.
Other programs that have held off gridlock at the ports of Los Angeles and Long Beach include construction of the Alameda Corridor, a dedicated rail line that connects the harbor with downtown L.A., and PierPass, an effort to encourage the operation of marine terminals during off-peak hours. The latter involves a fee levied against trucks operating during prime daytime periods, in order to fund a second shift by dockworkers in the evening. The program has been widely called a success, for getting thousands of trucks off the highways during rush hours.
One obstacle for carriers is the need to move most international containers through a handful of ports that offer the best infrastructure and access to both local and inland markets. John Bowe, president of the Americas for ocean carrier APL, says the line mostly focuses on the Los Angeles/Long Beach and New York/New Jersey gateways. But it's getting harder for freight handlers to squeeze more capacity out of those locations.
"We're out of real estate, and have environmental and other concerns, particularly on the social side," says Bowe. "There are some basic facts that are working against expanding container terminals in phase with expected demand." Barriers include local citizen complaints about additional truck and rail traffic, noise and lights.
Rail facilities in Southern California are not growing fast enough to accommodate projected volumes, says Bowe. That's one reason why APL recently launched a container service between Asia and four U.S. East Coast ports via the Suez Canal. The line said the new service would offer a level of reliability that has become harder to achieve with ships calling the overcrowded West Coast.
Whence the Funding?
There is a pressing need for more money to fund the expansion of ports, roads and rail systems all over the country, says Bowe. Much of the available cash gets funneled into local projects of dubious value, attached as "earmarks" to big transportation funding measures by powerful lawmakers.
"There's a very uncoordinated application for what funds the federal government does come up with," Bowe says. "We also think there's room to encourage the participants in the system to invest more, and more quickly." He cited one pair of proposed bills to grant a 25-percent tax credit to railroads, shippers and businesses that invest in new rail infrastructure for the movement of freight. Even with substantial industry support, the bills, dubbed the Freight Rail Infrastructure Capacity Act of 2007, remained pending in Congress as of late August, their fate uncertain.
U.S. railroads have taken heavy criticism in recent years for system delays. But they have also been among the biggest spenders on improvements. The Burlington Northern Santa Fe (BNSF) has invested billions of dollars on new equipment and route improvements over the last decade. More recently, it announced further enhancements to a proposed Southern California International Gateway (SCIG), a near-dock rail facility that will serve the ports of Los Angeles and Long Beach. The project will take millions of truck miles off the local freeway system, the railroad has claimed.
Steve Branscum, group vice president of consumer products with BNSF, believes multi-user facilities such as SCIG are the way to go in port areas with limited space. The siting of on-dock intermodal yards doesn't necessarily lead to the best use of land, he suggests, unless the terminal in question is large enough to justify it. A better way might be to get containers off the docks as quickly as possible, draying them to a larger yard that can more efficiently make the transfer from ship to train.
BNSF's own system is in fairly good shape with regard to rolling stock and mainline capacity, Branscum says. The railroad has worked for more than a decade to double-track, and in some cases triple-track, its main intermodal route between California and Chicago. It plans to expand the capacity of other core routes, such as between Chicago and the Pacific Northwest, and into the southeastern states.
Where the rail network remains lacking in capacity is at West Coast ports. There's an urgent need, says Branscum, "for more intermodal loading and unloading capacity, and track infrastructure to support it." That's where projects such as SCIG fit into the picture.
Since the last congestion crisis, shippers and carriers have been exploring other port areas along the West Coast. Oakland in Northern California, and Seattle and Tacoma on Washington's Puget Sound, are major centers of international container activity, though not at the level of Los Angeles/Long Beach. Branscum says Oakland is engaged in long-term planning for vacant land that it has acquired from the U.S. Navy. The likely outcome will be the development of two common-user, near-dock intermodal facilities, one operated by BNSF and the other by the Union Pacific Railroad. Tacoma also has space available for new marine terminal and intermodal development, thanks to an agreement it concluded with the local Puyallup Indian tribe back in 1990. With their smaller local population bases, both Oakland and Puget Sound ports have banked their futures on the handling of intermodal freight with origin or destination deep in the interior.
Intermodal is no panacea for cross-country freight, however. While it remains an important option for moving both international and domestic containers over longer distances, it can handle only a small portion of the total volume of trade. "If we doubled rail intermodal volume tomorrow," says Con-way's Mullett, "it would take less than one percent of trucks off the road." So highways are still the number-one concern of those calling for new investment in infrastructure.
The Holistic View
At the same time, transportation interests are coming to realize that the issue can't be addressed in a piecemeal fashion. Although its name betrays its origins, the lobbying group known as the Waterfront Coalition has expanded its vision to include railroads, highways, warehouses, container yards and terminal facilities. In a 2005 white paper, the group called for a national transportation policy that would develop system-wide solutions for alleviating congestion.
Ideas put forth by the coalition include an increased reliance on night shifts at marine terminals, the pooling of chassis by carriers, and a more even distribution of ship sailings from Asia, to avoid the vessel "bunching" that occurs on certain days of the week at major U.S. ports. Alternatives to the West Coast, including the Suez and Panama Canal routes to the East Coast, were also laid out. (Panama's approval last year of a plan to add a third set of locks to the canal will offer a long-term solution to congestion and size restrictions on that route. And there's talk of building a competing canal, possibly in Nicaragua.)
Inevitably, however, the debate circles back to money. The Waterfront Coalition is engaged in what executive director Robin Lanier calls "a raging battle" over the financing of infrastructure. The group strongly opposes a plan by the State of California to impose a tax of around $60 per 40-foot container. It is also fighting attempts by the ports of Los Angeles and Long Beach to levy a fee on beneficial cargo owners, estimated at between $30 and $50 per container, to fund infrastructure projects both inside and outside port boundaries. Both plans are unconstitutional, Lanier says, adding that the port scheme would be "an administrative nightmare."
Meanwhile, the Federal Highway Trust Fund, to the extent it exists, is "about to go broke," says Lanier. She expects debate to run through the remainder of this year and well into the next, on how to make the fund solvent and continue to support critical infrastructure improvements.
Another industry group, the World Shipping Council, is urging a similar high-level approach to the issue. "Anybody who understands supply-chain management recognizes that a problem anywhere in the chain can have an effect somewhere else," says vice president Anne Marie Kappel. It begins, she says, with one of the most intractable issues in transportation: dredging. Ports must deepen their channels and berths to handle the latest generation of megaships, yet such efforts can span decades as they encounter growing environmental opposition. When it comes to dredging, Kappel says, "there's more of a problem getting through the permitting process than getting the money."
Politics and bureaucracy continue to put up barriers to the identification and funding of projects that can benefit the movement of freight. John McLaurin, president of the California-based Pacific Merchant Shipping Association (PMSA), lays out the woes: "The lack of a national transportation policy, the balkanization of each individual port area with respect to infrastructure and environmental needs, confusion as to which agency is doing what and who has the lead, with an overlay of a non-growth attitude by many ... which runs counter to the continued growth in the state." As a result, he says, "nothing is being built."
A series of "choke points," including marine terminals and rail capacity, will limit future growth in California and beyond, McLaurin suggests. Even a measure approved by state voters last year, authorizing $40bn in bonds, of which about 10 percent would go to projects in support of goods movement, isn't necessarily a solution. Legislation now moving through Sacramento seeks to impose restrictions that would make it difficult to access the money for infrastructure improvements, McLaurin says.
Barring a radical change of direction at the federal level, transportation interests don't appear optimistic that the infrastructure crisis will be solved anytime soon, despite the occasional bridge collapse. But Lanier does see one ray of hope. "I'm optimistic that American business is going to be more and more involved," she says. "There is a growing interest in the highest levels of boardrooms about transportation issues."
William Schutt is president of Matcor Inc., a firm of engineers in Doylestown, Pa., that specializes in corrosion control. He blames many of the problems found in bridges, piers and other structures on the failure to incorporate proven corrosion-protection technology. Specifically, he says, corrosion can be prevented by application of an electric-conducting coating on the surface of the concrete, with wires running to the reinforcing steel at the core. An electrical current, generated by standard AC power, creates a layer of hydrogen molecules which inhibits corrosion. The treatment is relatively inexpensive, Schutt says, but it's not commonly found outside the oil and gas industry. As a result, the cost of corrosion damage in the U.S. today is around $30bn a year. Proposed legislation in the House of Representatives would provide tax breaks for the inclusion of corrosion-prevention methods in non-pipeline projects, but the bill was tied up in committee as of late August. Says Schutt: "Education needs to be done."
The Transportation Crisis: Two Crying Needs
Problems with the nation's transportation system are structural in nature, sometimes literally so. Two experts have issued scathing criticisms of the ways in which major construction projects are carried out today. Barry B. LePatner is a New York City-based lawyer who specializes in construction issues. He charges that the U.S. construction industry is little more than a hodgepodge of small contractors and subcontractors who cannot coordinate their efforts, and are given free rein to exceed project budgets without consequences. While other industries have increased their per-worker efficiency by 250 percent over the last 40 years, construction worker productivity has fallen by 22 percent, LePatner says. Half the labor costs in construction projects is lost to inefficiency and delays. He calls for a national policy that would encourage companies of a national scale-ones that could quote fixed-price contracts and do high-quality work in the process. The alternative, he says, is more deadly disasters caused by the failure of roads, bridges and other infrastructure. "Consolidation has to happen," he says. LePatner makes his case in a new book, "Broken Buildings, Busted Budgets: How to Fix America's Trillion-Dollar Construction Industry."
BNSF Railway, www.bnsf.com
con-way Inc., www.con-way.com
Barry B. LePatner, www.lepatner.com
Pacific Merchant Shipping Association, www.pmsaship.com
Port of Los Angeles, www.portoflosangeles.org
Waterfront Coalition, www.portmod.org
World Shipping Council, www.worldshipping.org
Enjoy curated articles directly to your inbox.