Prepared by Patrick Meagher for presentation to the Up State Railconnect Committee at their meeting on November 9, 2016
Good morning. I am Patrick Meagher. I am a resident of Weaverville, I own a home here and I pay taxes here. For supervisors Fenley and Burton I am on leave today so I could provide my input to your process without being in conflict with my county employment. My comments today are mine alone.
When I first read about the CALTRANS Grant for the rail connect study I was surprised, and then I wanted to know what gave CALTRANS the authority to do that. Well, I found it! It is two sentences at the bottom of page 298 of the California State Rail Plan and it reads as follows, “There may be an economic development opportunity that could be enhanced thru a decision for a short line connection. An example would be development of a new rail route connecting the deep water port at Humboldt Bay with the national rail network in Sacramento Valley.” Now this authority is pretty shaky when you understand and I quote from the intro page of the rail plan, “The contents do not necessarily reflect the official views or policies of the State of California or the Federal Rail Road Administration.
I want to address two issues with you this morning. First the Humboldt Bay alternative Rail Corridor Concept level Construction Cost and Revenue Analysis. This is the rail connect study completed in 2013 for the Humboldt Bay Harbor, and Conservation District. It is over 40 pages and goes into incredible detail on how the study was conducted, provides results, recommendations, and identifies key issues that must be resolved in order for rail connect to be successful. Unfortunately the cost estimates for the rail line construction at 1 billion dollars plus does not include cost estimates for environmental issues and their remediation if possible, and the cost of rolling stock and locomotives to be used on the rail line.
In August this year, Governor Brown signed into law SB 1279. The law prohibits use of state transportation department funds for port projects designed, in part, for coal shipments. The law will affect projects proposed after January 1, 2017. So this impacts the mix of bulk cargo identified in the 2013 study and will require reassessment of impact with that commodity now dropped out.
This is a great document! I believe you, the committee, should adopt it in its entirety, as a foundation document upon which to build your work. I say this to you in all candidness. You work is being watched by Trinity County citizens. If it appears that you are duplicating work completed just three years ago and, if it deviates substantially from the 2013 study, it will call into question your public announcement that your study and I quote, “we aren’t writing a report to justify a railroad, but to determine if a railroad is justified.” I need for you to know that several community members have told me after reading my summary of the 2013 study that they thought your efforts are going forward because the 2013 study was too critical i. e. HIGH COST, HIGH RISK, and that the promoters of the Humboldt Bay cargo seaport needed a do-over to better support their agenda.
The second issue is the Humboldt Bay Seaport. The name of your group is UpState RailConnect Committee. That title suggests that the issue you are working on is much broader than it actually is or should be. Reality is contained in the second sentence of page 298 of the California State Rail Plan, and I quote again, “An example would be development of a new rail route connecting the deep water port at Humboldt Bay with the national rail network in Sacramento Valley.” That’s it, and that is all that your efforts should be about.
The recommendations contained in the 2003 Port of Humboldt Bay Revitalization Plan, while 13 years old are still accurate today. For example, the Drewry and Associates prediction of a maritime cargo shipping “shakeout” is occurring as I speak today. Ports America, the largest terminal operator in Oakland went bankrupt in February this year. The Oakland port manager explained that portion of the waterfront will be left vacant for the foreseeable future, a decision made by the Ports executive board. Hanjin Shipping Company, the sixth largest maritime shipping company world-wide, is also a major shareholder in Port of Long Beach’s largest terminal. Hanjin filed for bankruptcy in September, their ships are stuck at sea and unable to come into port because the company has no funds to pay port docking and cargo handling fees. World-wide In 2015, 359 dry-bulk cargo ships were scrapped. Twelve dry bulk maritime cargo lines have gone into bankruptcy and lost their assets. Others have lost access to lines-of-credit for their operations. This is being driven by the decline in commodity exports, connected to changes in world market demand for commodities.
The 2003 Port of Humboldt Bay Revitalization Plan assessed that development of a general cargo port in Humboldt Bay as HIGH COST-AND HIGH-RISK, and the 2013 study projected development costs of 200 million dollars for a terminal in Humboldt Bay.
My research and documentation regarding the viability of a commercial general cargo seaport in Humboldt Bay reveals that it is too small and to isolated even with a rail connection to compete economically with, Oakland, LA, and Long Beach for container cargo. I refer you to my commentaries that were published in THE TRINITY JOURNAL last summer for details. Regarding bulk commodity cargo, SB 1279 takes coal out of commodity mix. That coupled with the decimation of the commercial bulk-commodity shipping companies tells me that the survivors that are still operating will use their “just enough” ships to service current demand at established west coast commodity shipping ports in hopes of still making a small profit. Humboldt Bay will not be one of these ports.
So where does all this leave your feasibility study? First, I strongly recommend you include both the assessments and recommendations from both the 2003 and 2013 studies as your baseline for what you are doing now. If you ignore them you will jeopardize your work and results. Second, Due to profound changes in maritime shipping business there is excess capacity in all operating terminal ports in California. This condition will exist for some time into the future. Third, Humboldt Bay has no terminal facilities, no terminal operator, and no commitment in writing from any maritime shipping line to utilize Humboldt Bay as a cargo destination now or in the future. Fourth, public funding for construction of the rail line and the port terminal is closed off. Fifth, private funders will not touch a project of this magnitude given the high-cost high-risk factors and weak and volatile international market for commodities. Finally, without a functioning cargo port now or in the future, there is no need for a rail connection to the central valley.
So, what is the committee to do? Options are few.
Option 1. Soldier on with your study no matter what your results are. Bad for you and bad for supporters of the rail connect and most importantly supporters of the Humboldt County Commercial Seaport. There is no good way to fix the reality of severe market problems with maritime cargo shipping. It is what it is, and you cannot change it. Opposition to your efforts will hammer on the issue of the port being too small and too isolated and international shipping business decline. A further problem with this approach is Trinity County residents will end up opposing your efforts through a ballot box initiative and environmental law suits. Not good in the long term for you. Good for county residents that want control of land use and environmental issues.
Option 2. Call it a day and move on. Focus your efforts on the missing pieces of the 2013 assessment. Write a report. Recognize that Humboldt Bay today and in the future is not usable as a general cargo seaport. Perhaps with future changes in maritime shipping needs and international priorities, it may be. Task a committee to revisit the issue in five years.