Author Archives: UpstateRail Disco

Plans falter for West Coast coal terminals

Coal companies look to Asia, but face port challenges.

Sarah Tory

Rev. Ken Chambers has lived in West Oakland for all of his 50 years and grappled with air pollution the entire time. The neighborhood, on the eastern shore of San Francisco Bay, is surrounded by three major highways, an active railroad, and the fifth-busiest port in the country. Chambers’ four children showed symptoms of asthma, he says, a common condition among their neighbors. And although air quality has improved since then — thanks to new laws regulating emissions — the neighborhood’s mostly black, low-income residents still suffer from asthma rates up to three times higher than other parts of Oakland.

Last April, Chambers and his neighbors caught wind of a plan to redevelop the old Oakland Army Base, located along the waterfront in West Oakland, including a major new terminal for shipping coal to Asia. Proponents said that it would bolster the neighborhood’s struggling economy, and that coal exports were a necessary component, because they would provide revenue to operate the terminal. Critics, however, including Chambers, argued that fugitive coal dust blowing from trains headed for the port would further deteriorate West Oakland’s air quality, and that burning the coal overseas would exacerbate climate change.

And then, in late July, opponents scored a major victory when the Oakland City Council voted to ban shipments of coal from the city, citing the “false choice” between jobs and the environment — and halting the multimillion-dollar coal export proposal in its tracks.

The decision, which came after more than a year of feisty debate, placed Oakland at the center of a growing battle over the fate of the coal industry. Domestic demand for coal has collapsed in recent years, displaced by cheap natural gas, along with wind and solar power. As U.S. coal companies look to overseas markets for salvation, plans for the necessary West Coast export terminals have been blocked by local communities and environmental groups worried about climate change and human health and safety. Taken together, says Sierra Club attorney Jessica Loarie, the long-term market forces and growing public opposition “do not bode well for the coal industry.”

None of this bodes well, either, for places like Carbon County, Utah, which got its name from its vast seams of coal. This rugged landscape southeast of Salt Lake City was already heavily mined by the late 1880s. It entered Old West history in 1897, when legendary bank robber Butch Cassidy and his partner, William Ellsworth “Elzy” Lay, stole the Pleasant Valley Coal Company’s $8,000 payroll. Later, nearly 400 miners died in two underground explosions, in 1900 and 1924.

Despite that early tumult, Carbon County grew to depend on coal. For most of the last century, coal supplied the vast majority of Utah’s energy needs and attracted the attention of other states as well. In the early 1980s, a Southern California electrical utility cooperative helped persuade the state to build a massive power plant, the Intermountain Power Project, in western Utah, promising to buy its coal-generated electricity.

But things changed as utilities increasingly switched to cheaper natural gas and renewables. In 2013, Los Angeles, which had a contract with IPP, voted to end its reliance on coal-fired electricity by 2025, in favor of natural gas. The decision stunned Carbon County, 75 to 80 percent of whose jobs depend on coal mining and power generation. Hundreds of locals have lost their jobs as coal-fired power plants have closed and mines have shuttered. “It put us into a tailspin,” says County Commissioner Jae Potter. “What do you do?”

That trend has rippled across the Interior West, from Colorado to Montana, amid plummeting U.S. demand for coal. After declaring bankruptcy, major firms like Arch Coal and Peabody Energy are downsizing — cutting jobs, closing unprofitable mines, and taking on less debt.

In the early days of coal’s decline, however, the industry still looked profitable to the private equity industry, which buys up troubled businesses, restructures them and sells them at a profit. Although the U.S. market was collapsing, Asia’s demand for coal appeared insatiable. Private equity firms, such as Salt Lake City-based Lighthouse Resources, bought mines in Montana and Wyoming and began pushing export projects in Washington and Oregon. And in 2013, Galena Asset Management invested over $104 million in Bowie Resources, a Kentucky-based coal company, to create Bowie Resource Partners. Backed by more than $800 million in private equity money, Bowie went on a spending spree, buying three Utah mines owned by Arch Coal. The company later bought three more mines — two in New Mexico and one in Colorado from Peabody Energy, another coal giant on the verge of bankruptcy. In a press release, Galena CEO Jeremy Weir heralded the Bowie partnership’s opportunity to “reshape the Western U.S. coal paradigm.”

In its financial documents, Bowie outlined plans to export its landlocked coal through West Coast ports. But it glossed over a major problem: The existing marine terminals in California and other West Coast states were too small to export the millions of tons of coal that its Utah mines could produce. A new larger terminal planned for West Oakland, however, could provide the opportunity Bowie needed.

When the marine terminal proposal for West Oakland first surfaced in 2013, coal was not mentioned. Instead, the developer said the terminal would ship bulk goods like iron ore, corn, wind turbines and auto parts. Chambers, like many of his neighbors, supported the project, which would help replace some of the 7,000 blue-collar jobs lost when Oakland Army Base closed in 1999.

Then, last April, a local Utah paper, the Richfield Reaper, broke a story that the developer had tried to keep under wraps: Four counties in Utah, where Bowie’s coal mines were located, intended to invest in the proposed Oakland terminal, with the intent of shipping their coal out of it.

The city’s vote against coal stalled the plan, and other blows soon followed, including new legislation banning state funding for bulk-coal terminals. In the signing letter, Gov. Jerry Brown highlighted California’s recent moves to replace coal with cleaner energy sources. “That’s a positive trend we need to build on,” he said, calling Oakland’s ban an important step that other localities — and the state — should follow.

By the end of August, things were looking even worse for the terminal: The four Utah counties where Bowie owns mines withdrew their application for the $53 million state loan to invest in the project, and Bowie canceled its IPO, citing poor market conditions.

In early November, construction began on the first phase of the Army base redevelopment, but whether or not the bulk terminal will still be part of the project remains uncertain. The developer, California Capital & Investment Group, and its terminal operator, Terminal Logistics Solutions, declined to be interviewed for this story.

One thing, however, is certain: The long-term economics of big export projects no longer appear as promising as they once did. Transporting coal by rail 1,500 miles from Utah to the West Coast is expensive, says Anna Zubets-Anderson, a senior analyst at Moody’s Investor Service. Add the cost of shipping it to Asia, and it’s tough for U.S. producers to compete with countries like India and Indonesia, which have much lower labor and transportation costs.

International coal prices have spiked recently, but Zubets-Anderson says the uptick is temporary, largely due to the Chinese government’s attempt to cut its own coal production and consumption. Heavy rain and flooding in other parts of Asia have also disrupted coal supplies. “When those issues are resolved, prices will go back down — likely by the middle of 2017.”

Elsewhere in the West, other export projects are facing a similar fate. Since 2007, the six coal terminal proposals slated for the Pacific Coast have dwindled to just one — the Millennium Bulk Terminal in Longview, Washington — after Lighthouse announced it was no longer supporting the Morrow Pacific Project in Oregon. In November, the project was terminated.

The proposed Millennium terminal in Washington is on similarly unsteady ground. After declaring bankruptcy last January, Arch Coal, a major investor in Millennium, sold its $57 million stake in the project, leaving Lighthouse as the sole backer. Meanwhile, hundreds of residents from across the Pacific Northwest testified against the project during the last round of public hearings in October, echoing the concerns expressed by other West Coast communities and Indigenous groups, such as Washington’s Cowlitz Tribe, who argue that coal export projects threaten cultural and economic resources like salmon, violating their treaty rights.

Other West Coast cities are also following Oakland’s lead. On Nov. 16, the Portland City Council voted 3-0 in favor of a resolution that would halt new fossil fuel infrastructure, such as export terminals, and expansions to existing facilities. A final vote is scheduled for Dec. 8.

For the industry, this combination of grassroots resistance and political opposition is creating financial risks — like a “one-two punch,” says Clark Williams-Derry, an energy expert at the Sightline Institute, an environmental think tank. And the uncertainty makes big projects harder and harder to justify.

Even President-elect Donald Trump’s campaign pledge to revive the ailing U.S. coal industry and put miners back to work is unlikely to turn things around. Increasing anti-coal activism and cheaper natural gas are discouraging utilities from investing in coal, says Zubets-Anderson — not just in the U.S., but around the world. “I don’t foresee the new administration being able to change that,” she says.

Though Chambers applauded Oakland’s decision to ban coal exports, he feels badly for places like Carbon County that hitched themselves to a single commodity. “They’re struggling, too,” he says. West Oakland can empathize. Like Carbon County, it needs jobs — but not, Chambers believes, at the expense of human health.

Correspondent Sarah Tory writes from Paonia, Colorado, covering Utah, environmental justice and water issues.

http://www.hcn.org/issues/48.21/plans-falter-for-west-coast-coal-terminals

Statement Concerning Feasability Of Development Of A New Rail Route Connecting The Deep Water Port In Humboldt Bay With The National Rail Network In Sacramento Valley

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.

Dry-Bulk Shipping Firms Face Unprecedented Crisis

By
Costas Paris

The Wall Street Journal

http://www.wsj.com/articles/dry-bulk-shipping-firms-face-unprecedented-crisis-1453293892

LONDON—Falling demand from China is wreaking havoc among the world’s biggest shipping companies, forcing some to offload vessels at a discount to survive one of the industry’s deepest crisis.

“Things have just stopped in China,” said George Logothetis, chairman and chief executive of the Libra Group, an international shipping firm, speaking at The Wall Street Journal’s CEO Council luncheon at the World Economic Forum in Davos, Switzerland. He described the situation as “Armageddon level.”

The shipping industry’s pain has been worse for dry-bulk shipping companies—whose vessels carry much of the raw materials of global trade, from grain to iron ore. The Baltic Dry Bulk Index, sometimes viewed as a proxy for global trade, peaked out just before the 2008 financial crisis at 11000 points. On Wednesday, it closed at 358. The index has hit fresh record lows every day since the beginning of the year.

That is forcing some shipping companies to offload vessels at bargain-basement prices. Many of those same firms were bulking up just a few years ago, confident the global economic crisis was behind them.

“We’ve never seen anything like this,” said Emanuele Lauro, chief executive of New York-listed shipping major Scorpio Bulkers Inc. “We never thought we would find ourselves in this situation when we were buying ships in 2013 and 2014 at historically low levels. But, in the past few months, the priority has been to create a liquidity runway [by selling ships] and keep zero value off the table.”

Scorpio Bulkers—part of Mr. Lauro’s Scorpio Group, which also includes a fleet of tankers and ship-management services—spent $1.5 billion for 28 “capesize” vessels, the biggest general-cargo ships in the water, between November 2013 and March 2014. As the prices of commodities that Scorpio ships have tumbled, it has sold all of them, at a loss of $400 million.

Shares in Scorpio Bulkers have lost 85% of their value in the past year, and were at $3.75 in New York at midday Wednesday.

“It’s a bloodbath, which calls into question the survival of many dry-bulk shipping companies,” said Basil Karatzas, a New York-based maritime adviser. He said the number of capesize vessels in the water exceeds demand by more than 50%.

Daily general-cargo freight rates for newly built capes are currently around $3,000. Owners need rates of $6,000, or as much as $12,000 for vessels with financing costs, just to break even. For older vessels, the daily operating cost, including financing, can be up to $23,000.

Mr. Karatzas said big players such as Scorpio and fellow major Star Bulk CarriersCorp. can withstand the difficult market conditions as long as they have access to capital markets. Nasdaq -listed Star Bulk, which is majority-owned by U.S. private investor Oaktree Capital Management LP, recently sold four capes still under construction, raising $148 million. Its shares were trading midday Wednesday at 39 cents, compared with a high above $228 in October 2007.

Nasdaq notified Star Bulk this month that it has six months for its stock to reach a minimum bid of $1 for 30 consecutive trading sessions, or it will face delisting. Other big bulk carriers in breach of the minimum-bid rule include DryShips Inc., FreeSeasInc., Globus Maritime Ltd., Paragon Shipping Inc., Top Ships Inc. and Ultrapetrol Ltd.

Star Bulk didn’t reply to requests for comment.

A handful of smaller operators filed for bankruptcy-court protection last year. Also last year, at least a dozen closely held companies ceased operations, mostly in Asia and Europe, brokers said.

“A lot of companies have gone under, and more will go under this year,” Mr. Lauro said. “We will go under if this market persists.”

Scorpio Bulkers now has a fleet of 49 smaller ships, and Mr. Lauro said he would try to hold on to them in hopes of a recovery.

“This year is going to be very tough, but for those who can weather the storm, the upside could be very high,” he said.

The market is expected to be at least partially supported in the second half as increased volumes of grains come into play. Brokers said Ukrainian wheat exports will move in substantial volumes this year, boosted by the falling value of the hryvnia. The lifting of a grain-export tax by the new Argentine government also should support the market.

“We rely on moving products like cement and steel,” Mr. Lauro said. “The grain-exports pickup will boost the market, but agro products alone [are] not enough, and this year I don’t see any other drivers strong enough to push the market up.”

—Khadeeja Safdar in Davos contributed to this article.

Write to Costas Paris at costas.paris@wsj.com

Corrections & Amplifications: 
Shares in Scorpio Bulkers listed in New York at $9.75. An earlier version of this article incorrectly stated they listed at $117. (Jan. 20, 2015)

 

 

Gov. Brown delivers huge blow to Oakland coal plan

[The coal industry is desperately looking for west coast ports with rail service. – Admin]

A developer’s plan to ship coal from Oakland’s docks took a huge blow Friday when Gov. Jerry Brown signed a bill to block state funds for any coal-shipping terminals in California and vowed to keep up a fight against the fossil fuel.

The news came weeks after the Oakland City Council voted unanimously to bar shipping and handling of coal throughout the city, sending the proposed terminal by developer Phil Tagami into an uncertain future. Tagami is a friend and longtime political supporter of Brown’s.

“I think it’s a real win for the people of California,” said state Sen. Loni Hancock, D-Berkeley, who sponsored the legislation, which was the only one of four coal-curbing bills she pushed this year that won the Legislature’s approval. It passed the Senate on Thursday and Brown signed it into law less than 24 hours later, with a message that underscored his role as a leader in the battle against climate change and broke his long silence on the coal controversy that rattled his former hometown.

Read the full article here: http://www.sfgate.com/bayarea/article/Gov-Brown-delivers-huge-blow-to-Oakland-coal-plan-9187855.php

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.

Copyright © 2017. Powered by WordPress & Romangie Theme.