Monthly Archives: July, 2016

Choo-choo Fantasies

Exposing this east-west rail nonsense before it gathers steam

By Ryan Burns for the Northcoast Journal

May 24, 2012

Inside his carpeted Eureka offices, attorney Bill Barnum stood before a large map of the city and pointed to the upper right corner. “See who the author is?” he asked. The map, a handsome, sepia-colored lithograph, was created in 1938 by J.N. Lentell, a civil engineer and surveyor who first came to Humboldt County in 1891. All these years later, the map still fills Barnum with joy. “This is one of the most fun things you’ll ever look at if you really care about local history,” he said with a grin.

Gazing at the framed print, Barnum spoke whimsically about the city’s rugged early industrial days, when all you needed to succeed was hard work, an idea and the money to see it through. Pointing to a rectangle near downtown he said, “My great-great-grandfather is the guy who founded this one, the Gross tract.”

Barnum, 57, is deeply enamored of the past. “The history of things really imparts to me a lot of meaning,” he said.

For several months now, Barnum has been meeting regularly with a group of likeminded men — conservative, middle-aged history buffs who want to resurrect a 19th century idea and transform it into a reality here in the 21st. They’re promoting the notion of building a new railroad east from Humboldt Bay, 125 miles up and over the coastal mountains to connect with the national rail system in Gerber, south of Red Bluff. The idea dates to the late 1800s, and the route they imagine for the line was first reconnoitered in 1909 by J.N. Lentell, the man who drew Barnum’s beloved map (see sidebar).

Barnum himself advanced this idea more than 20 years ago. Then chairman of the Humboldt Bay Alliance for Economic Development, he advocated the project as an alternative to the landslide-plagued Eureka Southern line, which ran north-south. That line was later wiped out by storm damage in the winter of 1998-99 and remains severed with no credible plans for restoration on the horizon.

Before the sounds of one train fantasy had faded, another came roaring in. The east-west train idea has been gaining steam in recent months, with fuel provided by Eureka kazillionaire Rob Arkley. In a March 1 radio interview on KSLG he described himself as a one-man engine. “I have done a fair amount of work on this and spent my own money and dealt with people at high levels.” He said he’d spoken to Union Pacific Railroad reps, private equity fund managers, “the Chinese,” and government officials in both Sacramento and Washington, D.C. A spokesman for Union Pacific would say only that the company has been approached about a potential rail project.

Later that month Arkley went on KINS and declared that the project will not only turn Humboldt Bay into the first green port in the world, it will revitalize the entire region. “This is 1,000 to 1,500 union jobs, wealth being created in this county unlike anything we’ve seen; our kids will stay here; we will have our future again.”

Now, local governments are climbing aboard, with the City of Eureka donning the engineer’s cap. On Feb. 23 the City Council voted unanimously to pursue community development block grants from the state to pay for a feasibility study. The city has also hired former Harbor District CEO David Hull as a consultant to help gather political support from neighboring counties. The county Board of Supervisors has agreed to hear a presentation on the feasibility study. And Arkley suggested in a radio interview that he’ll ask the public Headwaters Fund to pay for that study.

On April 12, government and business leaders were invited to an economic development forum put on by the Humboldt Economic and Land Plan (HELP), a shadowy, Arkley-backed group. There, Eureka City Manager David Tyson said that while he was once a skeptic, how’s now a believer.

In Humboldt County, where the economic glory days of large-scale timber production are fading from memory and where our geographic isolation has only increased in recent years, this idea is enticing. Imagine our port bustling with business from the global marketplace. Ships loaded with Asian goods docking in our harbor, the freight being loaded onto eastbound trains. Goods from the American heartland arriving via rail and getting crane-lifted onto ships bound for Shanghai, Osaka and Cartagena. Our own goods flowing outward to the world. And jobs. Everywhere, jobs.

It’s an alluring fantasy. Unfortunately, the challenges facing such an endeavor are so monumental, the money required to realize it so astronomical, that the east-west train is likely to remain mere fantasy for many, many years.

You can read the full article here:

http://www.northcoastjournal.com/humboldt/choo-choo-fantasies/Content?oid=2133242

Humboldt Bay Alternative Rail Corridor Concept Level Construction Cost and Revenue Analysis

Humboldt Bay Alternative Rail Corridor Concept Level Construction Cost and Revenue Analysis

Final Report 2013

Executive Summary

BST Associates, along with the Burgel Rail Group, was retained by the Humboldt Bay Harbor, Recreation and Conservation District to examine the concept of restoring rail service to the Samoa Peninsula, either through restoration of the existing North Coast Rail line or through construction of a new east-west rail corridor linking the Humboldt Bay region with the mainline rail system near Red Bluff.

This analysis involved two main tasks: in the first task, the Burgel Rail Group developed preliminary cost estimates for constructing a new east-west alignment to the Red Bluff vicinity, as well as for reconstructing the existing North Coast Rail corridor. In the second task, BST Associates estimated the volume of cargo that would be required to cover construction costs if the project were to be self-financed, based on the net revenue generated per ton of cargo. This analysis assumes that the project would be financed through bonds, and the analysis used a range of interest rates to illustrate both public and private financing.

The goal of this analysis was to provide a preliminary estimate of the volume of rail cargo needed to make rail service to Humboldt County economically viable. The focus of this analysis is dry bulk cargos such as coal, iron ore, grain, potash, and others. The identification of these commodities was not intended to provide a market analysis for a rail line to the Humboldt Bay region, and makes no recommendations regarding potential rail cargo. Rather, these commodities were chosen due to the fact that they now move by rail in high volumes, and that these existing movements provide the revenue and cost data needed to estimate the volume of rail cargo required to finance a rail line to Humboldt Bay.

Because the focus of this analysis was high-volume cargoes, containerized cargo was not included. The concept of a container port on Humboldt Bay has been the subject of several past studies, and the cost estimates presented in this analysis assume that the rail corridor would support double-stack container operations. However, given the relative strength of the bulk cargo markets compared with the container market, bulks represent a stronger potential market for a Humboldt rail line at this time.

Conclusion

Rail service to Humboldt County will require a major investment, through either a new East- West rail alignment or through reconstruction of the former North-South line. In order for this investment to be financially feasible, the rail line will need to generate large volumes of cargo.

A rail line to Humboldt County would face strong competition from existing ports, primarily those on the U.S. West Coast. Humboldt County would face several competitive disadvantages relative to these other ports, including the need to cover the cost of constructing the new line, and the lack of a rail distance advantage.

In addition to the lack of rail infrastructure, waterborne exports of large volumes of bulk commodities (or containers) would likely require substantial investments in new cargo terminals. Also, the Humboldt Bay navigation channel is not as deep as that at most of the competing ports, which would also require a substantial investment.

In conclusion, development of rail service to Humboldt County is likely to be both high cost and high risk.

The full final report is available here:
http://humboldtbay.org/sites/humboldtbay.org/files/Humboldt%20Rail%20Analysis%20Final%208_22_2013.pdf

Rail Connect to Humboldt Bay Seaport, Wait, There’s More!

Patrick Meagher, Weaverville

Trinity Journal, 7/20/16

http://www.trinityjournal.com/opinion/letters_to_editor/article_c4f3698a-4e0e-11e6-8fb7-57c977a20b5a.html

Last week in these pages I made the case as to why container cargo ship service at Humboldt Bay Seaport is not competitive and therefore there is no need for rail connect from the port to the central valley main rail service.  A key part of my argument was the 2003 Port of Humboldt Bay Harbor Revitalization Plan, and again I quote from page 11, paragraph 2, “The scenarios that include a public general cargo terminal are not recommended because they are not supported by market analysis and they involve an unreasonably high level of risk.  Almost all of the markets that would be involved in public general cargo terminal operations were identified as unattractive in the prioritization analysis, and Humboldt Bay was found to be uncompetitive in most of them as well.  The ‘build it and they will come’ nature of public general cargo terminals, combined with short contract terms common in the trade, high customer leverage, and intense port competition, would result in excess capacity and level of risk that is not commensurate with the limited market opportunity available.”  Has anything changed since 2003?  Nope, just look at the Port of Oakland experience this year.  Contractor Ports America Outer Harbor Terminal filed for chapter 11 Bankruptcy in February 2016.  Just five years ago Ports America and the Port of Oakland signed a 50 year lease agreement making the Port of Oakland the company’s single largest unsecured creditor according to court documents.  As reported in the Thursday, July 14, 2016 San Francisco Chronicle, “there was a reason why Ports America went bankrupt.  The shipping industry is in the doldrums.  That’s thanks partly to the advent of large numbers of megaships, which have sent prices down as they carry more cargo and reduce fuel costs.  That’s good for consumers….But it wreaks havoc for port related companies trying to gain market share by cutting costs.  Before its bankruptcy, Ports America was losing about $40 million a year.”  Port of Oakland executive director Christopher Lytle commented, “signing up someone to replace Ports America as an operator will only repeat the same experience.”  Drewry, a British shipping consulting firm predicts a port operation’s shake-out is coming.  They noted, “We’re expecting a wave of mergers and acquisitions and also likely to see more terminal operators follow Ports America into bankruptcy.”  As a final comment on the Ports America bankruptcy, Mr. Lytle stated, “Our board doesn’t want us to make the same mistakes that were made a few years ago, putting someone in there that couldn’t get business.  If a company doesn’t have a good plan that’s going to say where cargo is coming from, why would we do that?”  It appears that the 2003 assessment and recommendation against a container cargo port in Humboldt Bay is just as relevant today as 13 years ago given the lessons of Port of Oakland with operator Ports America.  Again, without a container cargo port in Humboldt Bay there is no need for a feeder rail line.

Rail connect to Humboldt seaport not a game changer

Patrick Meagher, Weaverville

Trinity Journal, 6/29/16

http://www.trinityjournal.com/community/columnists/article_e4b2b06a-3d87-11e6-b499-8b3000378300.html

This is in response to the article “Grant awarded for rail connect study” in the Trinity Journal:

Is it feasible to build a rail line from the “national rail system” in the Sacramento Valley to the proposed Humboldt Bay Seaport? Of course it is — given enough money to build it. If you build it, will the merchant ships loaded with shipping containers come to Humboldt? A resounding no is the answer, and here are the reasons why.

To start with you need to understand the problems identified in the Port of Humboldt Bay Harbor Revitalization Plan of February 2003, page 11, paragraph 2. It states as follows, “The scenarios that include a public general cargo terminal are not recommended because they are not supported by market analysis and they involve an unreasonably high level of risk. Almost all of the markets that would be involved in public general cargo terminal operations were identified as unattractive in the prioritization analysis, and Humboldt Bay was found to be uncompetitive in most of them as well. The ‘build it and they will come’ nature of public general cargo terminals, combined with short contract terms common in the trade, high customer leverage, and intense port competition, would result in excess capacity and level of risk that is not commensurate with the limited market opportunity available.”

Next, has anything changed since 2003 to improve the outlook for a shipping terminal in Humboldt Bay? No, not really. Stephen Carmel, senior vice president of Maersk Line Limited, tells us that today over half of all container cargo is component level goods and materials destined for manufacturing and assembly plants or just-in-time inventory-management systems.  This means consistency, reliability and shipping schedule integrity are of paramount importance.  The key goal of container shipping today is 99 percent on-time delivery.

On-time container cargo discharge and loading with intermodal terminal container transfer providing immediate access to main line rail networks are an absolute necessity for profitability.  Container ships operate in networks or routes of many ports serviced by multiple ships on steady schedules. These maritime operations are a considerable part of the overall cost-efficiency picture of intermodal container shipping service.

Finally, there is the biggest issue, economies-of-scale. Cost of shipping is determined by cost-per-container. In other words, the larger the ship the more containers it can carry and total cost of transportation goes down. As an example, container ship Benjamin Franklin, operated by CMA, CGM and loaded with 18,000 containers called at the ports of Oakland and Los Angeles in late 2015. 11,229 containers were handled in Los Angeles using nine cranes during her 90-hour stay, generating an average berth productivity of 200 moves per hour.

So, how does the proposed Humboldt Bay Seaport stack-up against this kind of operation? It doesn’t and won’t. The Humboldt Bay Seaport is too small and isolated, even with a proposed 100-plus mile rail feeder line, to compete economically with container ports such as Oakland, with intermodal loading adjacent to the port, and the Los Angeles complex with portside intermodal loading. The point of this discussion regarding potential for Humboldt Bay Seaport is that it is still economically non-competitive with other West Coast cargo ports. Given this, there is no reason for rail-connect from Humboldt Bay to Sacramento Valley.

Well, the Transportation Commission has $276,000 to do the study, so how about the commission updating the 2003 Humboldt Bay Revitalization Plan (don’t tell me it doesn’t have anything to do with the proposed rail line as I have just demonstrated it has everything to do with it) as a starting point and use its recommendations to determine economic payoff for the rail line. Couple this with interviews of maritime shipping line executives to determine viability of a proposed Humboldt Bay Seaport as a marine cargo destination and departure point and, oh by the way, in case you didn’t know there is still no cargo handling infrastructure of any kind at the proposed Humboldt Bay Seaport.

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