deltamarine highway report

Report to MDOT Delta Marine Highway

Mississippi Ports Operational Evaluation (June 20, 2010)

Table of Contents

INTRODUCTION..................................................................................................................... 1 MISSISSIPPI RIVER TRANSPORT: CANOES TO CONTAINER-ON-BARGE ......................... 3 CONTAINER-ON-BARGE OPERATIONAL CHARACTERISTICS ........................................... 5 THE STATE OF MISSISSIPPI’S PORTS AND WATERWAY SYSTEM ...................................... 7 THE PORT CASE STUDIES ................................................................................................. 11 PROPOSED MHY DELTA DEVELOPMENT STRATEGY .................................................... 17 MHY DELTA IN THE CONTEXT OF THE PANAMA CANAL EXPANSION PROJECT ....... 20 PROPOSED OPERATIONAL PLAN ..................................................................................... 22 PROPOSED INSTITUTIONAL PLAN ................................................................................... 24 SUMMARY OF FINDINGS AND RECOMMENDATIONS ..................................................... 25


Mississippi Ports Operational Evaluation (June 20, 2010) Page 1

INTRODUCTION

The purpose of this Mississippi Ports Operational Evaluation is to evaluate the State of Mississippi’s waterway system and its ports, and to recommend container-on-barge1 (COB) operational roles to-ward expanding Mississippi’s role in international containerized trade markets.

BACKGROUND

In 1999, the State of Mississippi conducted a study of its ports (Mississippi Statewide Ports Assessment). The focus of that study was on the physical capacity of each of the ports, as well as an evaluation of the capital needs to sup-port the growth of the ports, and the Mississippi economy. As a result of the study, the Mississippi legislature created the Mississippi Multimodal Capital Improvement Fund for, among other things, inter-modal improvements at the State’s ports. Significant investments have been made to improve access to the ports, as well as to improve the operations of individual ports. More recently, the Mississippi Unified Long Range Transportation Infrastructure Plan (MULTIPLAN) was completed as a comprehensive analysis of transportation infrastructure and needs throughout the State of Mis-sissippi. The State’s ports and waterways were fully evaluated and assessed, as described in “Chap-ter 6 – Ports and Waterways Modal Assessment” of the MULTIPLAN2. The focus of this particular Mississippi Ports Operational Evaluation is on the operational roles of each of the state’s waterway systems and ports. It builds on the information and knowledge ga-thered from the aforementioned efforts.

FUNDAMENTALS FOR A SUSTAINABLE CONTAINERIZED MARINE HIGHWAY CORRIDOR

There exists the need for the development of a sustainable containerized marine highway corridor operation on a scale comparable to major rail and highway corridors. This report focuses on the ports and waterways in and around the State of Mississippi as the starting point for defining a broader regional and national plan. The following are the fundamentals that support this vision.

Container-on-barge Services are Viable and Sustainable. Container-on-barge services have existed for almost as long as the container trade itself has been in existence, predominantly in Europe and in China/Hong Kong. COB services are also in existence in the United States, particularly in the northwest, the Gulf Coast and along the eastern seaboard. The Mississippi river has the most viable north-south line-haul segments for developing COB operations, on a scale compara-ble to major rail and highway corridors.

1 Includes containers loaded directly onto barges as well as containers-on-chassis loaded onto barges. 2

A copy can be downloaded at www.gomdot.com.

Vision

There exists the need for the development of a sustainable COB operation on a scale comparable to any major rail or highway trade corridor.



International Gateway Port. The most successful COB examples have at least one major international container gateway seaport at the mouth of the waterway. The international container gateway is the critical node between the domestic inland container barge services and the international container ship services to major offshore container trade markets. The full-scale development of COB, on par with major highway and rail freight corridors, is dependent on the development of suffi-cient ocean container handling capacity at and around the mouth of the Mississippi River.

Significant Concentrations of Upstream Economic Activity. Container-on-barge services are most sustainable if there are significant existing or potential volumes of international maritime containers moving between the requisite international container gateway port and inland markets. The more than 20 states served by the Mississippi are the nation’s manufacturing center and breadbasket, offering enough upstream activity to support full-scale COB operations, on par with major highway and rail freight corridors.

Reliable, Rapid & Scheduled Services. The conditions and characteristics of the waterway system have to support a rapid and scheduled service that is reliable. These include channel depth, minimal locks, and manageable distances. The experience in Europe shows that frequency and level of service are the most important means for competing with trucking services. What the Rhine barges offer in higher speeds and faster turnaround times, the Mississippi makes up for in terms of fleet integration and operational redundancy; Flexibility to service several terminals and ports, optimizing scheduling, while at the same time enhancing economics by increasing the scale of the shipment.

Mode Shift Policies and Mechanisms. The European Union encourages modal shift from trucks to rail and waterways through programs such as Marco Polo, offering market based subsidies designed to take traffic off the highways and on to the waterways. Major container port gateways like Rotterdam use modal diversity criteria as part of their tenant lease evaluation process. The impending growth in container handling terminal capacity along the Gulf Coast presents an opportunity for instituting mode enhancing strategies and policies. Implementing mode enhancing tactics at the outset of container traffic development is critical to the success of container trade development in the region as a whole.

Market Segmentation. Passive supply side approaches and the reliance on trends such as converging transport costs are not achieving the needed results. Market segmentation provides a tactical means for optimally directing policies, funding, incentives, promotion, marketing and project development efforts at segments of the waterway system that provide the most ideal conditions for operating COB services. The region’s higher value merchandise and trade sectors currently served by truck and rail intermodal services are sufficient enough in volume and density to respond favorably to the benefits of COB services. This report uses the Mississippi ports and waterways system as a basis for outlining a COB opera-tional framework. It defines the relevant characteristics of COB, the roles and functions of the Mis-sissippi ports and waterways in the context of COB, and defines the operational characteristics of a full-scale COB, including line haul segmentation, scheduling and fleet integration strategies.



M ISSISSIPPI R IVER TRANSPORT : CANOES TO CONTAINER-ON-BARGE

The Mississippi River has played a deep role in transportation development throughout the entire history of the United States. Transportation along the river has evolved from a role of exploration and discovery to the transportation of large volumes of bulk goods and materials.



PRIMARILY A BULK TRANSPORTATION SYSTEM

The Mississippi River system that feeds the entire United States heartland through its extensive network of tributaries serves primarily as a bulk transportation network. The dominant method of transport is by barge tow, a method ideally suited for moving large volumes of bulk cargoes, over long and short distances. While the transport of high value goods in containers is generally a role for the highway and rail modes, containers-on-barge are emerging as a viable opportunity. The next phase in transport innovation on the Mississippi is the shipment of high value trade merchandise in containers-on-barge. One such pioneering service is the Osprey Line.

THE OSPREY LINE COB SERVICE

The Osprey Line is a barge transportation company that offers the only functional COB solution to and from plants and facilities along the Gulf Intracoastal Waterway (GIWW) and the lower Mississippi River, as well as Gulf Coast ports. Its primary service is between the Port of Houston and the Port of New Orleans and between New Orleans and Memphis. It also operates other services on an as needed basis to markets such as Freeport, Victoria, Beaumont, Lake Charles, Pascagoula, Mobile, St. Louis, Chicago, Owensboro, Cincinnati, Pittsburgh and other locations.

ADVANTAGES OF FLEET INTEGRATION

The key to Osprey’s success has been its integration into an established general cargo and bulk barge service. Osprey Line LLC is owned by Kirby Corporation, which operates inland tank barges and towing vessels, transporting petrochemicals, black oil products, refined petroleum products and agricultural chemicals throughout the inland waterway system, and Cooper T./Smith, with core activities in stevedoring, terminals, harbor docking tugs and other maritime services. While it was initially operated as a standalone service, using a dedicated fleet of tugs/tows and barges, it was ultimately purchased by a towing vessel-inland barge operator and a warehouse operator. The waterway container trade lanes throughout the Gulf Coast region did not have the densities to support a dedicated fleet of equipment best suited for high volume bulk cargoes. This approach of integrating the container service within bulk and general barge services allows for the provision of a regular liner service but at lower throughput volumes than is normally feasible for a standalone

Cross Sector Subsidy

COB services on the Mississippi are cur-rently subsidized by the bulk transporta-tion services sector. The region’s most sus-tainable COB services are integrated into larger bulk operations, thereby benefiting from the economies of fleet scale and vessel ubiquity.

The Economics of Ubiquity.

Container barges used on the Mississippi are standard open hopper river barges used for a wide variety of cargoes and are easily integrated into a conventional bulk fleet. The tows and tugs hauling the barges are also standard. Ubiquity results in a limited need for repositioning, saving the barge oper-ator a great deal of money and time.



container service.

CONTAINER-ON-BARGE OPERATIONAL CHARACTERISTICS While container barges play a relatively minor role on the Mississippi, they have been in existence for several decades in Europe, particularly on the Rhine River which carries over 3 million twenty foot equivalent units (TEU) of containers on barges annually. European container barges are self-propelled and generally operate in a sin-gle configuration. However, when oper-ating in combination, a self-propelled barge pushes a tow of 2-5 open hopper barges. In comparison, barges on the Mississippi are attached together into a “tow”. The tow is either pushed by a towboat or pulled by a tugboat. A typical barge tow on the Mississippi accommodates 20 barges, but can accommodate formations with up to 50 barges.

CONTAINER-BARGE CAPACITY

The standard open hopper river barge can carry a maximum of up to 81 TEU boxes. The average load ranges from 40-50. The typical self propelled vessel on the Rhine carries an average of 150 TEU boxes. Like the standard open hopper barge on the Mississippi river, they can carry any kind of cargo, but the larger ones are dedicated to contain-ers. The average sailing on the Mississippi and in Eu-rope can range between 200 and 400 boxes per sailing. However, the Mississippi is wider and does allow for significantly larger combinations. Push barge combinations allow for flexibility to service several terminals and ports, optimizing scheduling, while at the same time enhancing the economics by increasing the scale of the shipment.

Container Barge Configurations

Container Densities on the Rhine



OPERATIONAL FLEXIBILITY OF THE WATERWAY CORRIDOR

An important lesson taken from the Rhine River is the im-portance of operational flexibility. The greatest COB densi-ties are concentrated on waterway segments that offer the fastest operational turnaround. Speed of vessel, distance be-tween inland ports and COB gateway ports, and the number of locks are all factors that have the greatest influence on waterway operations.

TRANSIT-TIME PARADOX

In Europe the greatest densities are closest to the COB gateway ports. The largest inland port market (Mannheim) is within 500 miles and is reached within 30 hours by container barge. Speeds are higher on the Rhine primarily due to the design of the self-propelled barges. On the other hand, barge speeds are relatively slower on the Mississippi. Flat hulled barge tows move slower than the self propelled barges with V-shaped hulls. Transit times to major markets on the Mississippi are measured in weeks.

BARGE TOW VS. SELF-PROPELLED APPROACH

The Rhine’s self propelled barge uses its speed to make quick turnarounds on its container delivery patterns. The Missis-sippi barge-tow approach makes up for its slower speed through fleet integration; Barges and tugs are ubiquitous, used for any type of cargo available at any port. Both models work in terms of capital utilization and sustainability for the barge operator. Notwith-standing that the Mississippi tow approach doesn’t offer the agility and flexibility expected by the container customer, it is the most sustainable market driven approach currently used on the Missis-sippi. Given the embryonic stage of COB development on the Mississippi, sustainability of service from the barge operator’s perspective is the most important priority. Speed and agility can slowly evolve as COB services become more sustainable.

Transit Times are Weeks



STATE OF MISSISSIPPI PORTS AND WATERWAY SYSTEM The State of Mississippi is blessed with at least three waterway systems along three of its four boun-daries. The Mississippi River flows along the western boundary of the State and includes the Yazoo River tributary, the Tennessee Tombigbee (Tenn-Tom) waterway along portions of its eastern boundary and the GIWW along its southern boundary. The State of Mississippi’s ports and waterway system is home to sixteen ports, of which six are on the Mississippi-Yazoo River system, six are on the Tenn-Tom Waterway system and four are located along the GIWW.

DESCRIPTIONS OF THE INDIVIDUAL PORTS

The MULTIPLAN is a comprehensive analysis of transportation infrastructure and needs through-out the state. The ports and waterways are fully described in “Chapter 6 – Ports and Waterways Modal Assessment” and can be viewed or downloaded at www.gomdot.com3.

PORT AND WATERWAY OPERATIONAL ROLES

From an operational standpoint, each of the waterways and individual ports play a strategic role in supporting the state’s trade, economic and commercial activities. They offer different characteristics and play very dis-tinct roles in the state’s overall transportation system. Understanding these roles is critical in assessing their application toward developing a full-scale Mississippi COB operational network, on par with major highway and rail freight corridors.

Gateway Ports vs Slackwater Ports. Gateway ports are major coastal facilities where international cargoes are transferred to/from international ocean-going vessels and processed through customs. A slack water (or in-land) port is a node along a waterway between the COB gateway port and inland markets. They mainly serve a role in handling domestic trade, specifically be-tween domestic locations (production and consump-tion centers). Although slack water ports are also used for the export of domestically produced cargoes and the import of foreign produced cargoes, they are rarely referred to as gateway ports. By the time imported cargoes reach a slack-water port, they have been cus-

3http://www.gomdot.com/Divisions/IntermodalPlanning/Resources/Programs/MultiPlan/pdf/Phase%20I/Chapter%206%20Ports%20and%20Waterways%20Modal%20Assessment.pdf

State of Mississippi Ports

& Waterways System

http://www.gomdot.com/



toms processed at a gateway port, and are usually defined as domestic cargo. The Port of Vicksburg is an exception as it is designated a Foreign Trade Zone and a Port of Entry and maintains a United States Customs service.

Mississippi-Yazoo Slackwater Ports. The ports that form the Mississippi-Yazoo system namely Rosedale, Greenville, Yazoo County, Vicksburg, Claiborne and Natchez Adams County, predominantly serve their tenants, as well as nearby hinterland markets. They vary in size, offering between 1-3 berths, each berth ranging in length from 200’ to 800’, and with depths of between 9’ and 22’. Their materials handling capabilities include general cargo, containers, break, dry and liquid bulks, steel and wood products. Three are operated by a County or Port Authority, one by a tenant, and one by a stevedoring company (Claiborne County is currently not being operated).

Tenn-Tom Slackwater Ports. The ports along the Tenn-Tom, which include Yellow Creek, Itawamba, Amory, Aberdeen Clay County and Lowndes County are predominantly tenant driven, but also serve the nearby hinterland. They vary in size, offering between 1-5 berths, each berth ranging in length from 800’ to 1,200’, and with depths of between 9’ and 12’. Their materials handling capabili-ties include general cargo, containers, break, dry and liquid bulks, grains, chemicals, salt, steel and wood products. Two are operated by a County or Port Authority, two by tenants, and one by a ste-vedoring company (the Port of Amory does not have an operator).

Gulf Coast Gateway Ports. Two of the four ports along the Gulf Coast Intracoastal waterway, the Ports of Gulfport and Pascagoula, are classically deepwater ports serving as international gateways; They have deep draft harbors and serve ocean-going vessels. Bienville and Biloxi have shallow draft harbors, with the former serving barges and the latter serving recrea-tional and commercial fishing sels. All three cargo ports handle bulk and break-bulk cargoes. Gulfport is also a container port with plans to expand its container handling, storage and rail inter-modal capabilities significantly. The coastal ports (vs slack-water) have a stronger role in serving hin-terland markets, as well as serving their tenants. Pascagoula and Bi-enville have a strong tenant base (predominantly petroleum and chemicals related industries), and also handle a significant volume of bulk and general cargo serving in-dustries in the Mississippi land. The Port of Gulfport has less tenant-driven business and is pre-dominately hinterland driven, dling bulk and break-bulk cargoes

Freight Corridor Line-Haul Segmentation

The Mississippi River system has the most suitable north-south line-haul segments for developing container-on-barge operations, on a scale comparable to major rail and highway corridors.



and refrigerated containers for markets throughout the United States.

Mississippi River System. The Mississippi River system is the largest waterway transportation system in the United States. It serves a hinterland of over 20 states, including America’s industrial heartland and breadbasket. Its cargo mix is largely bulk, liquid bulk and break-bulk, as well as project and container. The lower portion (south of Cai-ro, Illinois) has no locks. Barges and barge tows are the predominant mode of transportation. The average tow is 20 barges, but tows of up to 50 barges are not uncom-mon. The river is wide and is very navigable, with a con-trolling navigable depth of 9ft, with some sections deeper at 12ft.

Tenn-Tom Waterway System. The Tom-Tom was completed in 1984 to connect the Tennessee and Tombigbee Rivers, forming a 664 mile waterway system that extends from the Gulf Coast (Mobile, Alabama) in the south to the Ohio River (Paducah, Kentucky) in the north. While it effectively serves a 3-5 state hinterland, it has a broader reach through the Ohio and Mississippi River systems. It has the same cargo mix as the Missis-sippi, with significantly less densities, and accommodates the same mode of transport, albeit at lower traffic vo-lumes. The Tenn-Tom has 12 locks, which limits the barge tow size relative to the larger tows on the Missis-sippi, and speeds are generally slower due to the locks. While some sections of the waterway are at 12ft, the con-trolling navigable depth is 9ft.

Gulf Coast Intracoastal Waterway. The GIWW is a 1,050 mile long navigable inland waterway from Florida to Texas, a short portion of which runs along the Mississippi coast. It was completed by 1949 for the pur-pose of allowing barge transportation along the Gulf Coast. It has a similar cargo mix to the Mississippi and Tenn-Tom waterways, albeit less volumes than the Mis-sissippi. While the Tenn-Tom and Mississippi systems support mostly slack-water ports, the GIWW has a mix of both deep draft gateway ports as well as shallow draft ports.

Significant Concentrations

of Upstream Economic Activity

Container-on-barge services are sustainable only if there are significant existing or poten-tial volumes of international maritime con-tainers moving between the requisite interna-tional gateway port and inland markets. The first tier-inland markets are typically adjacent to or within close proximity to a navigable waterway.

Tried and Proven

Container-on-barge services have existed almost as long as the container trade, pre-dominantly in Europe and in China/Hong Kong. Container-on-barge services are also in existence in the United States, particular-ly in the northwest, the Gulf Coast and along the eastern seaboard.

The Importance of Market Scale

In order for the waterways to compete and provide the requisite levels of service and reliability to the container markets, it is important to focus on those market segments with significant scale. Scale is also critical in terms of attaining measurable and real benefits to congestion and the environment.



THE ROLE OF MISSISSIPPI’S PORTS AND WATERWAYS IN A COB OPERATIONAL CONTEXT

The State of Mississippi’s ports and waterways have specific and distinct roles to play in the development of a full-scale COB operation, on par with major highway and rail freight corridors.

Mississippi River Corridor. The Mississippi River has the ideal characteristics as a backbone corridor for COB services. It offers the greatest reach into the nation’s inland container markets. It has the largest fleets of barge vessels, offering the greatest opportunity for in-tegrating a sustainable COB operation. The lower Mis-sissippi offers the best operational characteristics and opportunities for improving barge velocities and equipment turnaround times.

Gulf Coast Corridor. The GIWW’s role in a COB opera-tion is to accommodate the development of coastal container gateway handling capacity. The development of significant downstream container gateway capacity is the greatest priority for developing COB services in and around the State of Mississippi.

A System of Gateway Ports. It is likely that more than one container port will play a role in the providing the downstream capacity. Therefore the GIWW will play a key role of interconnecting the individual COB gateway facilities, as well as connecting the aggregate down-stream container capacity to the Mississippi.

Tenn-Tom Corridor. The Tenn-Tom can play a similar role as the Mississippi River in providing a north-south waterway corridor for the movement of containers be-tween inland container markets and the coastal con-tainer terminals.

A Broader Regional Context. The three waterways are connected and together form a ringed network

of ports and waterways. Each have unique and distinct characteristics that can support COB activi-ties, to varying degrees. The State of Mississippi is central to that regional role, and has a strategic opportunity to influence a broader regional strategy.

The Broader Regional Context



PORT CASE STUDIES There are two types of ports that will play a key role in the development of a full-scale COB, the gateway port and the inland slack-water port.

Gateway Port. The gateway port is the interface be-tween international waters and the domestic US wa-ters. This interface is key from an operational stand-point and from a security and customs standpoint. Operationally, the gateway is a transfer point of con-tainers from ocean-going vessels too large to navigate domestic waters (and virtually all ocean-going vessels are foreign-owned and cannot legally navigate domes-tic waters). Administratively, all cargoes entering the United States must be cleared by Homeland Security (which includes Customs) for security reasons and for Duty assessment purposes. The same administrative rules apply to exports, but to a lesser degree. For this study, the Port of Gulfport will be used as a case study of a gateway port in the COB context.

Inland Port. The inland port is the upstream interface between the waterway (from the gateway) and the overland multimodal transport network that link to inland markets. Inland ports typically host industrial tenants, allowing the tenant direct access to the wa-terway. While most inland ports are bulk, break-bulk and special cargo oriented, a large portion of Missis-sippi’s publicly owned inland ports are adequately equipped to handle containers at an initial level. As volumes grow, additional cranes that have suffi-cient reach to transfer containers to/from barges, as well as container storage space. While higher contain-er volumes at gateway ports are critical to COB suc-cess, inland ports will typically handle relatively small-er volumes. For this study, the Port of Vicksburg will be used as a case study of an inland port in the COB context.

The Gateway Port

The fundamental operational role of the gateway port is to provide the requisite container densities in support of full-scale development of COB.

Two Port Case Studies

The Inland Port

The successful role of an inland port as a con-tainer port is dependent on the operational cha-racteristics of the waterway on which it is lo-cated, and its proximity to a viable inland con-tainer market.



THE INLAND PORT CASE STUDY

The ideal inland container port needs to meet four basic ports facilities criteria. It needs adequate vessel handling capacity (a barge slip with sufficient channel depth, berth space, a barge fleeting area, ro-ro capacity for containers on trailer), container handling equipment (a crane with adequate load and reach), container storage space and landside transport access (on-site rail spur to the container yard, or on-dock rail, interstate access). The Port of Vicksburg is an ideal inland port case study as it has all of the requisite facilities in place. It is also operated by a large private stevedoring company with extensive experience handling all forms of cargo, including containers. The Port is also a designated inland Customs port.

Port of Vicksburg Overview

Located along the Mississippi River.

Halfway between Memphis and New Orleans.

11th ranked U. S. Inland Ports in trip ton miles.

Truck traffic - 165,000 plus trucks annually.

Annual tonnage - 800,000 to 900,000 tons.

55 acres with 600 acres for future development.

Twenty-one tenants employing over 4,000.

Designated Foreign Trade Zone, Port of Entry.

Maintains a United States Customs service.

COB Operational Scenario The following are operational planning guidelines ap-plicable at almost any potential inland COB port:

20-30 thousand lifts per year.

10 container barges per week.

345 truck trips per week.

Facilities Requirements for an Inland Container Port

Vicksburg’s Existing Facilities are Ideal

A slack-water harbor; 9,550 feet channel

Barge fleeting area

Adequate berth space with 12-foot depth

T-dock with crane

129,000 square feet warehouse space.

Rail and road loop; Interstate access

Direct access from barge to truck or rail

Inland Customs port

Upgrades Planned/Needed

Repair and upgrade existing track (ST)

Container storage paving (ST)

Up-grade bridge crane – 40 tons (ST)

2-lane to 4-lane access road widening (ST)



Port of Vicksburg Container-on-Barge Site Concept Plan



THE GATEWAY PORT CASE STUDY

Given the lack of significant container gateway volumes in the Gulf Coast, specifically at and round the mouth of the Mississippi River, the COB gateway port is the most important facility development aspect of the COB strategy. In addition to the aforementioned operational, security and administrative aspects of the gateway port, the COB gateway’s primary objective is to build adequate container densities along the Gulf Coast. The Port of Gulfport is the ideal coastal gateway port to fit that role.

Port of Gulfport Overview

Established itself as the leading port in Mississippi

Serves Mississippi and markets throughout USA

Handles break-bulk, bulk and container cargo

10 Conventional berths and 1 Ro-Ro ramp

Two 100-ton Gottwald cranes

Over 400,000 sq ft of covered storage

Located on the KCS mainline, also served by CSX

Direct access to State Highway 49 and only 10 minutes from U.S. Interstate 10

On-port rail system

Open container storage with refer plug outlets

Customs secure boundaries

Barge services available at the Port

Existing Conditions

3rd busiest container port on the Gulf

2nd largest green fruit importer in USA

Major poultry exporter before Hurr. Kat.

Current capacity – Over 300,000 TEUs

Future Vision

The port has a 10-year Master Plan

Over $570 million in improvements

Over 1 mil. TEUs after Master Plan

N-S high speed rail into Midwest

Dredging - deepen & widen the channel

Port of Gulfport Master Plan



Container Expansion Plans at the Port of Gulfport

The Port of Gulfport is undergoing a major restoration and expansion program in response to expected growth in container activity and new business opportunities. The core driver for the container expansion is the ongoing widening of the Panama Canal, expected completion in 2014, which is expected to divert a large share of future transpacific container trade from the west coast ports to the east and Gulf coast ports.

Major Improvements to Handle Containers. In order to handle the ocean container vessels, it will require deepening of the port’s 36-foot channel to approximately 42 feet. In addition, in order to accommodate the landside transport needs, significant rail investments are being made including the purchase of the KCS line from Gulfport to Hattiesburg, and the development of on-dock rail intermodal facilities and an intermodal yard. Currently, over 90 percent of container freight traffic travels by truck from the Port of Gulfport, and the rail plans are expected to reduce the growth in truck traffic.

Landside Container Modal Strategy. With the recently funded improvements to the KCS rail line, a significant share of the truck traffic will divert to rail. However, based on experiences at other US ports, the rail share will likely ultimately range between 15% and 20%4. An enhanced landside container modal strategy could target the role of trucks at a 50% mode share, with the remainder handled by a combination of rail intermodal and container barge transportation. This can be achieved by implementing mode share incentives, such as those used by the Port of Rotterdam.

THE PORT OF GULFPORT GATEWAY IN THE REGIONAL CONTEXT

While some level of containers are handled by gateway ports in the vicinity of the Mississippi River’s base (referring to the area along the Gulf coast from New Orleans to Mobile), there is no major con-tainer gateway. This is the greatest obstacle to COB development. Currently, the entire Gulf Coast region handles approximately 2 million TEUs annually, 7% of all US ports, of which only 20 percent is located at the base of the Mississippi, less than 1.5% of US container port volumes.

Gulf Coast Container Expansion Plans. The Panama Canal’s expansion is driving Gulf Coast container handling capacity. Plans for total container capacity along the entire Gulf Coast totals in excess of 9 million TEUS over the next decade, up from 2 million TEUs currently. The vicinity of the Mississippi River’s base from New Orleans to Mobile could exceed 4 Million TEUs5 within 10 years:

4 The Southern California ports, which are truly intermodal hubs serving markets in the Midwest and Northeast, enjoy higher rail intermodal shares, but only as high as 40-45%. 5 Excludes expansion plans at the Ports of Houston, Tampa and other Gulf Coast ports not in the vicinity of the Missis-sippi River’s base. Mobile is included for reasons explained in the next section.

Mode Shift Tactics at Gateway Ports

The Port of Rotterdam uses the tenant lease process to secure modal diversity. They in-clude mode share, specifically waterway mode share, as a tenant ranking criteria:

Modal Shift (% tonnage on waterways)

Revenue (# of ships calling at port)

Economics (# of jobs created)



Port of Gulfport – Plans expand to over 1 million TEUs.

Port of Mobile – Recently built a 800,000 TEU terminal, with likely plans to expand further.

Port of New Orleans - Currently at 330,000 TEUs, plans to expand to 1 Million TEUs.

Seapoint – A planned ship-to-barge container transfer facility to handle 900,000 TEUs.

A MULTI-FACILITY CONTAINER GATEWAY STRATEGY With their container expansions complete, the Ports of Gulfport, Mobile, New Orleans and the Seapoint project each can play an important role in the development of COB; As a system of facilities, they present an even greater opportunity for success, similar to the relationship between the Ports of Rotterdam and Antwerp at the base of the Rhine. Their combined planned capacity will provide sufficient container volumes to support the development of a full-scale COB corridor6, on par with major highway and rail freight corridors. Even though they are separate facilities, they are all strategically located within close proximity to each other, forming sufficient critical mass at the base of the Mississippi River. These facilities are located along the GIWW, spaced out at distances of less than 100 miles.

National Imperative. Developing additional container capacity at the base of the Mississippi River is a national imperative. It is an opportunity to reduce the incremental impact of port container growth on the US highway system. Every 1 million TEUs in additional port capacity at the base of the Mis-sissippi could cut the growth in truck trips by 172 thousand trips, and 63 million trucks miles5. The addition of a third mode of landside container transport reduces the growth in container truck traf-fic. The same container port capacity built at a location without the benefit of an inland waterway network results in additional truck trips.

Fair Share of the Trade Pie. The development of 4 million TEUs in capacity at the base of the Missis-sippi poses little competitive threat to the industry. It represents about 6% of the USA's containe-rized ocean trade market in 2020, and 10% of the transpacific ocean container market.

Stimulate Inland Growth and Development. The development of 4 million TEUs in container capacity at the base of the Mississippi will sustain 40 small inland ports upstream, averaging 10 barges per week5. Or 10 larger inland ports the size of the Port of Mannheim on the Rhine, handling 50 barges per week, and 130,000 TEUs a year. This will stimulate growth and development inland, and help to counterbalance the continued pressure on coastal regions from high population migration rates over the past few decades.

6 Assuming container-on-barge captures a 25% enhanced mode share of inland container traffic.

A System of Container Gateway Ports



PROPOSED DEVELOPMENT STRATEGY Given the plans to develop additional container capacity at the base of the Mississippi River, there is a need for a COB strategy around these facilities. Moreover, the tim-ing for implementing such a strategy is ideal. Building the service in tandem with the growth in container vo-lumes is key to ensuring COB integration into the overall multimodal transportation logistics framework.

The State of Mississippi sits in a strategic position to spearhead a regional COB strategy. Successful implementation of this strategy will have significant positive transportation and economic implications for the state, the region and the nation. The Delta Container Marine Highway (Mhy Delta) development strategy builds on a regional “delta” network of waterways and ports that surround the State of Mississippi, .

Mississippi River. The Mississippi River, because of its role as the most prominent water transportation corridor in the nation, will be an important aspect in the development of river-based container services. The Lower Mississippi River, from the southern border of Illinois, downstream to the Gulf of Mexico, will be the initial focus of the strategy.

Gulf Coast Intra-Coastal Waterway. The GIWW will be the basis for the development of COB gateway capacity, and the main corridor interconnecting the ports, and linking them to the Mississippi River.

Tenn-Tom Waterway. The Tenn-Tom will close the loop on the Mhy Delta, creating a ring of waterways and ports handling container traffic. The Ohio River will play a part in closing the northern end of the loop, completing a closed circuit supply chain network.

A Convergence of Trends

This time and point in the development of container capacity in the Gulf is a conver-gence of trends, and an opportunity to influ-ence the mode choice decision process; With the shipper, the freight-forwarder/agent, third-party service provider, port terminal developers and operators, and the carriers.

The

Delta Container Marine Highway

Development Strategy



Phased Mhy Delta Development Strategy

A PHASED APPROACH

Notwithstanding the existing services in the region, full-scale development of COB services at a level comparable with any major highway or rail corridor, require a phased approach. There are certain aspects of the strategy that need to be fully implemented before major COB volumes can be realized.

Phase I: Container Gateway Ports. There are three critical elements that would need implementation at the gateway ports.

Volumes - The most critical phase is the development of significant container volumes at and around the base of the Mississippi River, New Orleans to Mobile. Without the development of at least 4 million TEUs in gateway throughput volumes, COB services will not have the opportunity to evolve into densities on par with major rail and highway corridors.



Mode Share - Enhanced mode-share incentives will need to be implemented so as to encourage mode diversion. In order for such incentives to work, they would need to be coordinated among the gateway ports, in an approach similar to the gateway ports that serve the Rhine River.

Inter-Gateway Services - The development of high-speed container services between the ports will allow for the re-positioning of loads in co-ordination with liner schedules. This is a common practice among closely positioned gateway ports on the east and west coasts. Moreover, the largest existing COB service in the Gulf region is between New Orleans and Houston.

Phase II: River-Based Line-Haul Services . As the container volumes start to build at the gateway ports, line-haul services should begin to evolve along the Mississippi and Ten-Tom waterway on either side of the State. The gateway ports are positioned in such a way that the growth of COB services will be possible on either side of the State. The State has 12 inland river ports, six on either side, which can potentially serve as inland nodal points.

Mississippi River Services – The Mississippi River is currently responsible for the nation’s largest bulk barge volumes. It also handles the largest river-based container volumes in the region, primarily between New Orleans and Houston and New Orleans and Memphis. As the container volumes begin to grow, the State of Mississippi’s inland ports will begin to play an increasing role as inland container nodes. For this report, the Port of Natchez was evaluated as a case study inland container port and was found to be ideal. The inland container port planning criteria outlined in this report can be utilized by the other Mississippi River ports in an effort to compete for traffic.

Tenn-Tom Waterway Services – While there are currently no sustained container services along the Tenn-Tom, the waterway does have the advantage of having the largest container gateway at its base. The Port of Mobile currently has a capacity of 800,000 TEUs with plans to expand to 1.2 million TEUs. There are at least 6 inland ports within the State of Mississippi located along the Tenn-Tom. The inland container port planning criteria outlined in this report can be applied be any of these inland ports in an effort to contest for the container traffic.

Phase III: Complete the Loop to Markets Beyond Mississippi. Notwithstanding the need for gateway densities, the development of inland container traffic along the Mississippi or Tenn-Tom waterways will be driven by the location of inland consumer/producer markets. There are several major population centers located along the Mississippi and Ohio River systems that are likely to attract significant volumes beyond the State of Mississippi’s borders. These markets will generate the bulk of the container traffic along either the Mississippi or Tenn-Tom waterways, and the services that call on the State’s ports are likely to be part of longer line-hauls serving markets beyond the State. Regardless of the sequence in the phasing of services, and whether the State’s ports are served first or added on to services that serve markets beyond, the implication is the same. The development of the containerized barge services will occur on either or both sides of the State of Mississippi as well as along its base along the GIWW.

The Leading Intermodal State

Mhy Delta in combination with the proposed intermodal yard at Palmers Crossing near Hattiesburg, will make Mississippi the lead-ing intermodal state in the USA.



MHY DELTA IN THE CONTEXT OF THE PANAMA CANAL EXPANSION PROJECT The development of the Mhy Delta comes at a convergence of several trends and one major project. Trends such as increased US consumption of Chinese imports, the dominance of Transpacific con-tainer trade, the lack of capacity at east and west coast ports, the continued densification of container traffic in the Gulf of Mexico and the Caribbean Basin, are all factors that con-tribute to the need for container capacity along the Gulf Coast, and the development of alternative modes of inland container transport. However the single largest project that has a major impact on the latter is the expansion of the Panama Canal.

PANAMA CANAL EXPANSION PROJECT

The program entails the construction of two new sets of locks - one on the Pacific and one on the Atlantic side of the Panama Canal. It also includes the widening and deepening of existing naviga-tional channels. The upper end vessel size through the canal will be 8,000 – 10,000 TEUs.

Impact on Vessel Economics. Widening the Panama Canal will allow larger vessels to use it, making it more economical to reach the ports east of the canal. Ships carrying cargo destined east of the canal that usually would dock at West coast ports will make the full haul instead. In the vessel business, it is important to make a sufficient amount of delivery turns so as to pay for the capital cost of the vessel. The larger the vessel, the more cargo it carries, and the further it can go and remain economical.

Impact on Canal Trade Routes. The west coast handles 70-80 percent of Asian trade with the United States. The bulk of the remaining 20-30 percent is han-dled by the east coast ports, via the Pa-nama Canal. This Asia-East Coast lane represents 57% of Panama Canal trade. When the canal expands, the share of Asia trade to the West coast will drop, increasing the east coast port traffic through the Canal. The result is a signif-icant increase in container traffic through the Gulf of Mexico. The growth increment in the Asia-East Coast trade lane will be highly contestable by well positioned Gulf coast ports.

Widening the Canal Allows Larger Vessels

64% of Panama Canal container trade flows are with

East Coast USA ports



After the Canal Expansion. The Asia – East Coast trade lane will remain the Canal’s largest, but the east coast will experience facilities limitations. Container traffic in the Gulf of Mexico will grow, and the Gulf Coast region will need additional container port infrastructure.

IMPACT ON US LANDBRIDGE TRADE LANES

The American heartland has historically been served by container ports on the east and west coasts. The heartland serves as a watershed between the east and west coast. Although the region is home to 30% of the nation’s population, only 7% of the nation’s container capacity is proximate to the region, specifically along the Gulf coast.

The Panama Canal expansion presents an opportunity for additional container capacity to be devel-oped along the Gulf coast to better serve the heartland region. Based on port expansion plans, 13% of the nation’s 2020 container capacity will be on the Gulf coast, with 6% at the base of the Missis-sippi River, up from 1.5% currently.

KEY ROLE IN ACCOMMODATING CANAL RELATED CONTAINER GROWTH

The Mhy Delta comes at a crucial time. The Canal project is estimated to be completed in 2014. The Gulf Coast container port expansion plans are large-ly to be completed by 2020. In order to successfully serve its role in accommodating the Canal expansion container growth impact, the Mhy Delta will need to be implemented over the course of the next 4-6 years.



PROPOSED OPERATIONAL PLAN The proposed operational plan is focused on the sustainability of services. Given that the Mhy Del-ta development will essentially be a private sector endeavor, it is critical that the proposed approach be based on operational plans that have shown some level of success on the Mississippi River.

LINE-HAUL SERVICE AND SCHEDULING PLAN

Given the long distances associated with the Mississippi River and its disparate markets, relative to the short legs along the Rhine’s more tightly spaced markers, the most likely operations plan is a tiered service structure that is dictated by the distances and market reach of individual line-haul segments.

Selected Line-Haul Segment Distances

Tiered Service Structure



The proposed operational plan has a three-tiered structure that is based on existing services that have worked thus far in the Gulf region.

Tier I – Regular Fixed Schedule Services. These run between two points on a regular fixed schedule basis; For example, once a week, on Wednesday, departing at 6pm. They work best along segments connecting with international ports serving ocean shipping lines operating on a fixed schedule basis. The service is also most viable along segments with the highest container potential. They operate almost independent of the bulk fleet schedules, except to rely on the supply of barges and tows from the bulk fleets.

Tier II – Regular Weekly Services. They run at least once a week, without a particular time or day established. This type of service offers greater flexibility for balancing demand with supply, and is best applied to segments that do not connect with a COB gateway port. This service is more dependent on the bulk fleet schedules, as well as the supply of barge equipment.

Tier III – Inducement Services. These services are non-scheduled with the greatest flexibility for balancing demand with supply. They are almost fully integrated into the larger bulk barge services.

VESSEL OPERATION PLAN

The Mississippi bulk oriented barge fleet approach to transportation service is not the most ideal for providing a container barge service. The reasons why are discussed earlier in the report, the most important of which is speed and agility. Nonetheless, what the Mississippi bulk barge loses in speed it makes up in fleet integration and adaptability.

Fleet Integration is a Viable Sustainable Strategy. A barge operator can provide a sustainable container barge service using bulk equipment, if it integrates the COB service into a larger bulk barge fleet.

Growth Strategy. Whether this approach will help grow the service beyond basic sustainability remains to be seen. In order to develop a full-scale COB service, comparable to major rail and highway container/intermodal corridors, the service will likely have to grow out from the shadow of the bulk operation.

Start with Bulk Fleet Integration. Given the proven sustainability of the bulk fleet integration approach, it should be the core to the initial vessel operations plan. However, incentives should be introduced to encourage alternative vessel technologies to the industry.

Restating the Benefits of COB

Container-on-barge proponents commonly use bulk terms and figures to communicate the barge’s comparative cost advantage; Typically 1 Barge carries 70 truckloads of dry bulk cargo and 144 of liquid bulk cargo. Implicit are the fuel cost savings, environmental impacts, road maintenance reductions, safety benefits, and producer price reductions, etc. However, containers are not bulky. They cube-out before they weigh-out. The average container-loaded barge translates to approximately 34 truck loads.

COB Saves Time for Shippers

While trucks travel faster than barges and deliver a container in less time than a barge, they have a longer time derivative per TEU. On average, the line-haul time for a con-tainer delivered by truck takes 2.5 times longer per TEU than it takes by barge. Time derivative savings are more relevant for large volume customers.



PROPOSED INSTITUTIONAL PLAN The Mhy Delta, although centered around the State of Mississippi, is a cross-jurisdictional project. It involves several states, specifically those states situated along the Mhy Delta system, the multiple authorities and commissions that have jurisdiction over the gateway and inland ports, port and terminal operating entities, the barge operating companies, and ultimately the shippers and receivers of container cargo. While the Mhy Delta is essentially a Mississippi plan, there are many aspects that impact the success of the project that are not within its jurisdiction.

Coordination of Gateway Port Investment Decisions. The expansion of container handling capacity at the base of the Mhy Delta along the Gulf Coast is the highest priority for the project. While the expansion of the Port of Gulfport is the State of Mississippi’s, the expansion in New Orleans and at Seapoint are the State of Louisiana’s, and the Port of Mobile is the State of Alabama’s. The decision-making for these expansion projects should remain as is, what is needed is increased inter-port coordination.

Cooperation of Enhanced Mode-Share Strategies. The coordination and cooperation of enhanced mode share strategies is also very critical. Inter-port competition is a very real aspect within the international container trade sector, and plays an important part in keeping US ports globally competitive. However, landside modal diversion presents a delicate balance between policy driven objectives and competitive motivations. Cooperation will be critical to success.

Fleet Integration and Conversion Strategies. While the existing approach of integrating container barge services into bulk barge services is sustainable, a container barge fleet conversion plan is also required. While this is largely a private sector issue, it is impacted by national laws and policies governing the US Maritime sector. Any form of fleet conversion must be to the benefit of the US Maritime industry as a whole. Hence, the success of this strategy will require coordination and cooperation at the industry, Federal and State levels.

National Security. The development of the Mhy Delta presents several opportunities toward developing a more secure international logistics supply chain. The Mhy Delta is a closed loop transportation system that is ideal for implementing new technologies and innovations to enhance trade security. Implementation of these technologies and innovations will require coordination and input from the department of Homeland Security and other Federal, State and Local agencies.

A MULTI-JURISDICTIONAL ENTITY

There are several options for pursing a multijurisdictional approach. One is for the State of Mississippi to coordinate among all the entities, and across all these issues. The second is to use an existing entity that is already recognized as a multijurisdictional entity which receives its funding from multiple entities.



SUMMARY OF FINDINGS AND RECOMMENDATIONS

The State of Mississippi has the strategic opportunity of driving the development of the next major innovation in intermodal container transportation. The development of the Mississippi Container-on-Barge Intermodal Supply Chain network is critical to the success of container trade growth in the region. The following are the key findings and recommendations:

Container Gateway Capacity

Issue. There is not sufficient container handling capacity at the base of the Mississippi River to support the development of full-scale container-on-barge operations throughout the Mississippi River system.

Strategy. Pursue a multi-port, multistate (Alabama, Louisiana and Mississippi) gateway container develop-ment strategy for the Gulf-Coast. In the State of Mississippi, we recommend the continued investment in con-tainer handling, storage and intermodal facilities at the Port of Gulfport.

Enhanced Mode Share

Issue. Gulf coast and east coast ports are historically truck ports; Their container markets are largely within a 1-2 day truck drive. Intermodal shares of port landside traffic are typically in the teens.

Strategy. Introduce a second intermodal mode, container-on-barge, to supplement rail intermodal as an alter-native to trucking, and introduce enhanced mode-share incentives that are tied to terminal operator leases.

Mississippi Bulk Vessel Fleets

Issue. Current container-on-barge tows on the Mississippi take 1-2 weeks to reach major markets like Mem-phis, St Louis and Chicago, compared to a 2-day turnaround on the prominent European waterways.

Strategy. Continue to use the existing approach of integrating container-on-barge services into the bulk fleets. This allows the Mississippi container barge operator to offer a sustainable level of service. However, incentives should be developed to gradually introduce self propelled vessels on specific line-haul segments that offer quick turn times.

Multijurisdictional Institution

Issue. The development of Mhy Delta is cross-jurisdictional, involving multiple states, ports and private enti-ties. There is no single multijurisdictional entity tasked with developing and promoting Mhy Delta.

Strategy. Identify an existing multijurisdictional entity to spearhead the effort and provide it with a specific mission and dedicated funding.

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