update: the panama canal expansion and the slc states

7/31/2019 Update: The Panama Canal Expansion and the SLC States

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THE SOUTHERN OFFICE OF THE COUNCIL OF STATE GOVERNMENTSPO Box 98129 | Atlanta, Georgia 30359

ph: 404/633-1866 | fx: 404/633-4896 | www.slcatlanta.org

SERVING THE SOUTH

Sujit CanagaRetnaSenior Fiscal AnalystSouthern Legislative ConferenceSeptember 2012

Southern

LegiSLative

ConferenCe

of

the CounCiL of

State governmentS

UPDATE: THE PANAMACANAL EXPANSION ANDTHE SLC STATESAN ISSUE ALERT FROM THE SLC

P h o t o c o u r t e s y o f i c k r u s e r g a i l f 5

2 8 v i a C r e a t i v e C o m m o n s L i c e n s e

The ongoing Panama Canal expansion is perhapsthe most transformative global transportationproject currently in progress. Upon comple-tion in 2014, the expanded Panama Canal will

facilitate an even greater low o trade between Asia andthe Americas and substantially impact the volume o tradereaching Gul and East Coast ports in the United States.The impetus for the expansion o the Canal, approved bythe people o Panama in October 2006, sprang from thatnation’s desire to continue to be a pivotal player in globaltrade patterns and strategically leverage its greatest asset –the Panama Canal – for its own economic wellbeing. Forthe nation o Panama (the only port in the world with ter-minals in two oceans), the Canal plays an extraordinary

role, impacting practically every aspect o society; at theeconomic level, economic activity lowing from the Canalaccounts for nearly 15 percent o gross domestic product(GDP), a clear indication o the enormous economic foot-print o the Canal on the nation. The expansion projectnot only will ensure the Canal’s dominance as one o themost critical global transportation linchpins, it also willstrengthen the linkages between Asia, the United Statesand Latin America.

A few decades after the American-led effort to construct

the Panama Canal, completed in 1914, discussions on ex-pansion plans already were underway. The 48-milewaterway connecting the Paciic and Atlantic Oceans,known as the Panama Canal, then constituted, and still re-mains, one o the most revolutionary water navigationalchannels in history. In fact, during the years leading upto World War II, there were serious discussions and pre-liminary excavations on this expansion effort, but this

initial impetus izzled out. In the six or seven decades afterWorld War II, the role o the Canal was magniied withthe immense growth in global trade. As the irst decade othe 21st century advanced, this surging world trade result-ed in horrendous trafic jams at the Canal, with dozens anddozens o gigantic ships – on the Atlantic side, laden withgrain from the Midwest, computer and electronic prod-ucts from Florida, coal from Appalachia heading to Asiaand, on the Paciic side, crammed with consumer durablesand electronics from Asia heading to the American EastCoast – dropping anchor and waiting their turn to transitthe Canal. The approximately 14,000 vessels carrying 280million tons, or 5 percent, o the world’s ocean cargo were

being slowed down considerably due to tremendous vol-

umes o sea-borne trafic at the Canal.

Even though oficials were running these shipping behe-moths through the Canal around the clock, the delays tothe shipping companies were prohibitive both in termso costs and wait times. Along with the massive growthin cargo volumes, the other discernible trend emerging inthe shipping industry was the construction o massive newvessels. Ever since the opening o the Canal nearly a century ago, the dimensions o cargo ships, naval vessels, andpassenger ships have been determined by their ability to

traverse the Panama Canal. In fact, nautical terminologywas adjusted to refer to a Panamax vessel, i.e., a vessel thatcould be accommodated in the Canal’s 110-foot wide lockchambers. For nearly 90 years, the vessels that moved mosto the world’s trade were able to it into these lock cham-

bers. These Panamax vessels had the capacity to carry amaximum load o about 5,000 TEUs (twenty-foot equiva-lent units, the nautical term for a standard container).



2 UPDATE: THE PANAMA CANAL EXPANSION AND SLC STATES

Then, a new generation o vessels that exceeded the cur-rent capacity o the Canal’s lock chambers emerged andposed enormous infrastructure challenges, another devel-opment that propelled the expansion effort. For instance,the Mærsk Line’s Gudrun Mærsk has the capacity to carryclose to double the capacity o the current class o vesselsthat transit the pre-expansion Panama Canal.* These in-ordinately large vessels are referred to as Post-Panamaxvessels and, increasingly, are being deployed to trans-port cargo across the globe as manufacturers, distributors,

* There are even larger vessels sailing the oceans now. For in-stance, the Mærsk Line’s PS-class vessels have the capacity tocarry nearly three times the container load o the Panamax ves-sels; the Emma Mærsk is capable o carrying 15,500 TEUs andhas an overall length o 1,302 feet, a width o 184 feet and a drafto 51 feet. The Emma Mærsk and her seven sister ships, Ebba Mærsk, Edith Mærsk, Eleonora Mærsk, Elly Mærsk, Estelle Mærsk,Eugen Mærsk and Evelyn Mærsk, are identical and the wave o thefuture in the shipping industry.

shipping companies and interested others seek to takeadvantage o the economies o scale involved with theirusage.† Experts estimate that these Post-Panamax vesselscurrently account for 16 percent o the world’s contain-er leet and, more importantly, 45 percent o the capacityo the leet, a stark reminder o their growing inluence inthe global shipping industry.

Furthermore, the U.S. Army Corps o Engineers reportsthat these numbers are projected to grow signiicantly

over the next two decades: by 2030, these Post-Panamaxvessels are expected to constitute 27 percent o the world’scontainer leet and 62 percent o its capacity. Figure 1 pro-vides a graphical representation o the transformation othe vessels that will be transiting the Canal after the ex-pansion. The new class o Post-Panamax vessels will be

† For the purposes o this publication, the term Post-Panamaxrefers to vessels that can be accommodated in the Panama Canaonce the expansion is completed.

Figure 1 Pre- and Post-Expansion Vessels Transiting the Panama Canal

Source: Panama Canal Authority, February 2011 (as presented in http://www.iwr.usace.army.mil/docs/portswaterways/rpt/June_20_U.S._Port_and_Inland_Waterways_Preparing_for_Post_Panamax_Vessels.pdf )



UPDATE: THE PANAMA CANAL EXPANSION AND SLC STATES 3

40 percent longer, 64 percent wider and require a 50-footdraft to transit the Canal. The new administrator o thePanama Canal Authority, Jorge Quijano, commenting onthe introduction o these Post-Panamax vessels after the

expansion noted that, “[W]e see a signiicant interest inusing vessels o 10,000 TEUs and up earlier rather than lat-er. But we expect to see early deployment o the 8,000- to10,000-TEU vessels and gradually move up to the 12,000-to 13,000-plus-TEU ships that can it in the new locks.”

Shipping experts and policymakers both within and out-side Panama realized the importance o the expansioneffort to accommodate the surging cargo volumes beingtransported across the oceans by this leet o supersizedships. In fact, along with Panama’s desire to be an inte-

gral player in future global trade, another driving forcefor the current expansion effort was the enormous gainsto be realized by the power o economies o scale. Entitiesup and down the supply chain, at every level, realized theconsiderable inancial gains - and improvements in opera-tional eficiency, productivity and proitability – with thedeployment o larger and larger vessels. As an example,Mr. Alberto Alemán Zubieta, administrator and CEO othe Panama Canal Authority, in a presentation in August

2012 noted two important examples o the lower costs as-sociated with Post-Panamax vessels transiting the PanamaCanal. First, a transshipment o coal between the Port oBaltimore to Xiangang, China, in a Panamax vessel (pre-

Canal expansion) costs about $35 per ton; the same amounto coal, between the same two cities, in a Post-Panamaxvessel would cost approximately $10 cheaper (or $25 perton). Second, grain transported to Asia from the American grain belt would cost about $55 per ton in a Panamaxvessel and the lower cost o $50 per ton on a Post-Panamaxvessel. (Administrator Alemán commented that the ‘land

bridge’ option, i.e., across the United States to a West Coastport from the East Coast remains the most expensive op-tion; in the example o a ton o grain, this transportationmode would cost $95 per ton).

Shortly after the 2006 referendum in Panama, work on theexpansion and modernization effort ($5.25 billion at thetime o inception) began. In essence, the project involvesthe construction o two new sets o single-lane locks – oneon the Paciic side and one on the Atlantic side o the Ca-nal. The new, concrete lock chambers will be 1,400 feetlong, 180 feet wide and 60 feet deep, while each lock com-

The MSC Bruxelles , measuring 1,105 feet long by 151 feet wide, a 49-foot draft, and a 9,200 TEU capacity, is an example o the kind o vessel that will be able to pass through the expanded Panama Canal in 2014. Photo courtesy o the Port o Virginia.




plex will stretch for more than a mile and a hal in length,creating the largest lift complex in the world.

While each lock will have three chambers, each chamber will have three water reutilization basins. Despite the

abundant rainfall in Panama, engineers working on theCanal have been cognizant o the need to conserve water because the Canal’s watershed (the 166-square-mile, man-made Gatun Lake) supplies drinking water to nearly theentire population living in the vicinity o the waterway.Given that nearly 2 billion gallons o water currently areneeded to ill the locks for transiting ships every day, theexpansion effort could have required an additional 2 bil-lion gallons o water, an enormous strain on the region’s

water resources. However, in an innovative move basedon the locks system on the Elbe River in Germany, engi-neers working on the Panama Canal expansion devised aunique water recycling system with the construction othree new water reutilization basins. These basins cumu-

latively will secure nearly two-thirds o the water fromthe locks as they empty, which will then be recycled andused for the next vessel that travels through the CanalWith the expansion, the new lock chambers will not onlyretain 65 percent more water than the current locks, theyalso will use 7 percent less water per transit.

In addition, the expansion project includes two newnavigational channels to link the new locks to existing

Figure 2 Panama Canal Expansion Eort rom Atlantic and Pacifc Entrances

Source: Panama Canal Expansion - Diagram o Panama Canal Locks, Popular Mechanics , October 1, 2009.




navigational channels, a measure that will result in ex-cavating nearly ive miles o new channel. The currentnavigational route through Gatun Lake also will be deep-ened by ive feet and widened from the 500-foot minimumto 920 feet on straightaways and 1,200 feet on the turns.In addition, Gatun Lake will be elevated and raised oneand a hal feet, generating an additional 550 million gal-lons o water each day for the locks. Upon completion,workers on the expansion project will have dredged 130million cubic meters (4,591 million cubic feet) o rock and

soil or, more descriptively, enough rock and soil to ill theEmpire State Building nearly 130 times. Not only will theexpansion effort be suficient to accommodate the largestPost-Panamax vessel, it doubles the Canal’s capacity. Fig-ure 2 provides a graphical representation o the expansionproject from both the Atlantic and Paciic entrances.

As mentioned at the outset, intertwined with Panama’sstrong support o the expansion o the Canal is the me-

teoric rise in international trade in the last two decadesExperts quickly are realizing that U.S. exports are a

bright spark in the otherwise relatively anemic economicrecovery currently in progress. For 13 consecutive quar-ters (between the second quarter o 2009 and the secondquarter o 2012), U.S. exports have expanded and the ex-pectation is for continued progress in this area, generating

jobs and economic opportunities for Americans acrossthe nation. Importantly, the U.S. Department o Com-merce estimates that every $1 billion in exports generates

15,000 jobs, a sizable number indeed. A number o factorshave propelled this solid export performance, includingthe low value o the dollar (which raises the competi-tiveness o U.S. products in international markets) andthe strategic efforts o U.S. multinational corporations tomarket such items as aircraft, motor vehicles and petro-leum products. Table 1 documents the progress o U.Sexports in the last few years.

A Post-Panamax vessel, the MSC Rita measures 1,063 feet long by 141 feet wide with a 48-foot draft when fully loaded at 8,100 TEU. Photo courtesyo the Port o Charleston.



State / Territory 2005 2009 2010 2011 Q1-Q2, 2012

Change,2005 to

2009

Change,2009 to

2010

Change,2010 to

2011

Change,2005 to

2011

Texas 129,346,156,716 162,994,740,450 206,960,767,594 251,005,673,768 130,779,079,370 26% 27% 21% 94%

California 116,689,901,804 120,079,965,765 143,192,250,991 159,121,792,333 81,964,984,835 3% 19% 11% 36%

New York 51,840,964,871 58,743,030,056 69,695,634,935 84,887,562,296 41,891,340,877 13% 19% 22% 64%

Washington 33,078,176,892 51,850,856,743 53,353,413,033 64,766,844,750 35,101,854,950 57% 3% 21% 96%

Illinois 36,168,606,637 41,626,110,699 50,058,293,734 64,823,414,516 35,055,332,553 15% 20% 29% 79%

Florida 33,443,890,512 46,888,006,761 55,364,760,752 64,904,313,111 33,094,041,374 40% 18% 17% 94%

Louisiana 19,403,622,081 32,616,451,452 41,355,870,039 54,976,078,091 28,370,233,961 68% 27% 33% 183%

Michigan 37,848,627,094 32,655,333,884 44,768,187,457 51,003,027,609 28,333,793,048 -14% 37% 14% 35%

Unallocated 33,942,777,524 33,619,608,007 45,697,621,518 45,286,080,134 25,664,093,490 -1% 36% -1% 33%

Ohio 35,110,493,790 34,104,484,238 41,493,512,722 46,415,700,981 24,615,439,576 -3% 22% 12% 32%

Pennsylvania 22,333,839,455 28,381,102,168 34,927,694,246 41,074,879,584 20,283,987,551 27% 23% 18% 84%

New Jersey 21,107,184,847 27,244,246,431 32,153,593,976 38,114,577,064 19,580,104,170 29% 18% 19% 81%

Georgia 20,656,953,025 23,743,041,911 28,949,552,263 34,776,304,710 17,559,606,476 15% 22% 20% 68%

Indiana 21,593,812,900 22,907,367,488 28,744,977,002 32,282,315,399 17,190,782,775 6% 25% 12% 49%

Tennessee 19,173,896,519 20,484,299,844 25,942,724,022 29,993,138,751 15,749,923,544 7% 27% 16% 56%

North Carolina 19,507,118,126 21,792,953,156 24,905,063,910 27,008,756,550 14,017,599,476 12% 14% 8% 38%

Massachusetts 22,051,608,163 23,593,277,279 26,303,601,826 27,761,320,278 13,510,502,577 7% 11% 6% 26%

South Carolina 13,959,863,465 16,488,111,133 20,328,687,951 24,697,462,187 13,049,499,269 18% 23% 21% 77%

Wisconsin 14,961,410,086 16,724,996,880 19,789,522,286 22,055,118,359 11,658,419,550 12% 18% 11% 47%

Kentucky 14,960,603,690 17,649,768,303 19,342,737,535 20,083,680,609 10,746,787,908 18% 10% 4% 34%

Minnesota 14,736,123,922 15,531,557,833 18,903,725,389 20,318,743,624 10,316,600,298 5% 22% 7% 38%

Alabama 10,879,227,812 12,354,803,017 15,501,508,839 17,854,217,255 10,073,886,380 14% 25% 15% 64%

Utah 6,067,039,030 10,337,135,031 13,809,376,642 19,033,516,351 9,708,309,374 70% 34% 38% 214%

Arizona 14,947,279,684 14,023,462,270 15,635,757,846 17,793,213,040 9,203,742,879 -6% 11% 14% 19%

Oregon 12,407,214,133 14,907,405,450 17,671,067,072 18,310,101,768 9,034,601,591 20% 19% 4% 48%

Puerto Rico 13,270,606,097 20,937,064,690 22,784,088,942 18,200,275,820 8,937,798,591 58% 9% -20% 37%

Virginia 12,238,353,364 15,052,091,034 17,163,324,645 18,088,836,844 8,871,809,371 23% 14% 5% 48%

Connecticut 9,749,851,769 13,978,898,792 16,056,449,947 16,211,927,999 8,233,355,759 43% 15% 1% 66%

Iowa 7,372,804,672 9,042,125,564 10,880,026,652 13,306,810,612 7,710,563,751 23% 20% 22% 80%

Missouri 10,513,779,116 9,522,229,617 12,925,559,774 14,153,831,541 7,535,067,319 -9% 36% 10% 35%

Mississippi 4,020,816,268 6,316,488,807 8,228,851,021 10,930,321,504 6,220,734,236 57% 30% 33% 172%

West Virginia 3,161,171,533 4,825,570,207 6,449,180,362 9,034,015,060 5,850,246,411 53% 34% 40% 186%

Maryland 7,138,361,224 9,225,376,423 10,163,267,062 10,852,469,923 5,797,722,907 29% 10% 7% 52%

Kansas 6,736,019,931 8,916,920,376 9,905,219,429 11,598,460,663 5,784,813,771 32% 11% 17% 72%

Nevada 3,941,005,948 5,672,185,096 5,911,812,450 7,977,768,260 4,976,958,272 44% 4% 35% 102%

Colorado 6,773,305,392 5,867,265,731 6,726,706,628 7,332,497,256 3,947,681,054 -13% 15% 9% 8%

Nebraska 3,003,380,987 4,872,924,899 5,819,949,181 7,582,290,200 3,902,243,471 62% 19% 30% 152%

Arkansas 3,870,933,045 5,266,978,589 5,218,646,154 5,607,245,809 3,827,553,824 36% -1% 7% 45%

Oklahoma 4,322,420,618 4,414,915,717 5,353,190,640 6,221,504,505 3,352,465,763 2% 21% 16% 44%

Idaho 3,273,308,589 3,877,389,493 5,156,919,667 5,904,889,386 2,750,938,110 18% 33% 15% 80%

Delaware 2,535,367,190 4,311,773,339 4,965,544,823 5,509,511,785 2,645,004,007 70% 15% 11% 117%

Vermont 4,672,094,793 3,219,270,656 4,277,417,496 4,256,644,212 2,085,323,954 -31% 33% 0% -9%

North Dakota 1,191,735,128 2,193,011,373 2,536,428,341 3,393,096,575 2,046,256,822 84% 16% 34% 185%

New Hampshire 2,557,496,011 3,060,715,994 4,367,331,611 4,297,163,753 1,836,308,715 20% 43% -2% 68%

Alaska 3,613,089,559 3,270,429,748 4,154,626,473 5,325,000,074 1,740,491,019 -9% 27% 28% 47%

New Mexico 2,542,942,913 1,269,535,234 1,540,970,873 2,091,791,699 1,542,030,426 -50% 21% 36% -18%

Maine 2,332,078,650 2,231,142,502 3,163,991,540 3,420,593,567 1,468,397,663 -4% 42% 8% 47%

Washington, D.C. 823,172,455 1,090,543,044 1,500,660,263 1,038,626,154 1,398,834,709 32% 38% -31% 26%

Rhode Island 1,268,454,948 1,495,522,447 1,949,146,488 2,282,413,186 1,244,657,630 18% 30% 17% 80%

Montana 715,019,613 1,053,312,395 1,388,777,953 1,587,422,516 787,765,063 47% 32% 14% 122%

South Dakota 948,198,422 1,010,960,601 1,259,394,822 1,460,280,514 778,300,464 7% 25% 16% 54%

Wyoming 670,612,892 926,141,589 983,287,911 1,218,540,184 718,471,126 38% 6% 24% 82%

Virgin Islands 576,895,091 1,217,003,134 1,898,505,274 2,315,770,889 508,856,216 111% 56% 22% 301%

Hawaii 1,032,143,549 563,059,688 684,045,484 884,069,629 295,734,342 -45% 21% 29% -14%

United States 901,081,812,545 1,056,042,963,028 1,278,263,225,486 1,480,431,903,237 773,350,932,618 17% 21% 16% 64%

Source: U.S. Department o Commerce, International Trade Administration, http://tse.export.gov/TSE/TSEhome.aspx, accessed August 24, 2012

Table 1U.S. Exports to the World, 2005, 2009, 2010, 2011 and Q1-Q2 2012 and Percent Change

(in thousands, $USD)




As documented in Table 1, there has been an impressivesurge in U.S. exports since 2010. Speciically, for the lat-est full year available, 2011, U.S. exports experienced agrowth rate o 16 percent, with West Virginia toppingall other states with a 40 percent expansion rate. Impres-sively, 12 o the 15 states belonging to The Council oState Governments’ Southern Ofice, the Southern Leg-islative Conference (SLC) states recorded double-digit

growth rates, with Louisiana and Mississippi both secur-ing a 33 percent growth rate between 2010 and 2011. Forthe longer period, 2005 to 2011, 46 o the 50 states reacheddouble-digit growth rates, with 10 o these states secur-ing triple-digit growth rates. Once again, West Virginia,Louisiana and Mississippi were the three SLC states thathad the highest expansion rate in the region for the peri-od 2005 to 2011.

Given that future export growth is going to be criticalto take full advantage o the Panama Canal expansion,the forecast for 2012 appears to be promising. Speciical-ly, i the U.S. export sector – at a minimum – maintainsthe numbers it reached in the irst hal o 2012, 36 stateswill see an increase in their 2012 exports over their 2011exports; once again, the Southern states would fare verywell and, o the 36 states expected to see an appreciation

between 2011 and 2012, 14 belong to the SLC. Given thedominant role played by exports in fostering econom-ic growth in the last few years, combined with PresidentObama’s pledge in 2009 to focus on export-led growth anddouble U.S. exports by 2014, there is strong consensus thatthis segment o the economy will be a thriving one.

Coinciding with the swirl o activity in Panama related tothe expansion, there has been a frenzy o action in portsacross the Gul and East Coast o the United States. Thisactivity stems from the fact that these ports are seekingto secure as much o the extra business, potentially bil-lions o dollars, that is expected to low to the East andGul Coast ports as a result o the expansion o the Ca-nal and continued growth in world trade. Even thoughmost experts immersed in the ield are convinced that themassive explosion in trade will provide ample opportuni-

ties for a number o these ports to beneit tremendously,they equally are convinced that these ports need to makeessential infrastructure enhancements to accommodatethe larger vessels that will be wending their way to theirdocks.

A number o factors account for the activity in these Eastand Gul Coast ports. For instance, demographers forecast

that the U.S. population will increase by 32 percent, or al-most 100 million people, over the coming 30 years, whileper capita income is expected to surge by 170 percentduring the same time period. Importantly, the regionexpected to experience the highest population growthare the South and West, a development that will gener-ate demand for enhanced trade in these regions. In factexperts calculate that this drive for increased trade will re-

sult in imports expanding more than fourfold and exportsexpanding more than sevenfold by 2030. This growthin trade likely will heighten the need for the nation’smaritime assets and related multimodal transportationsystems to be performing at peak capacity, a challengecomplicated even further with the onerous infrastructurerequirements to accommodate the larger vessels expectedthrough the expanded Panama Canal.

A corollary to this expected growth in global trade, in-cluding a renewed focus in the United States to promoteour nation’s exports, is the Free Trade Agreement (FTA

between the United States and Panama that was signed into law in the United States on October 21, 2011. (For itspart, Panama approved the agreement with the UnitedStates in July 2007). The presence o an agreement withPanama is an important boost to bilateral trade betweenPanama and the United States, since it often leads to aneven further liberalization o trade in goods and servicesIn the context o the ongoing expansion o the Canal, thepath for an even greater movement o cargo is considereda very likely scenario with the FTA.

Another factor contributing to the extra activity at theseports is the competition among them to capture an ever-increasing share o the trafic that will be coming throughthe Panama Canal. For a number o years now, there has

been a great deal o analysis on the tremendous economicimpact lowing from the nation’s ports. A study released

by the Selig Center for Economic Growth at the University o Georgia’s Terry College o Business in May 2012documented that Georgia’s deepwater ports support-ed 352,146 full- and part-time jobs across the state, some8.3 percent o total state employment, or one out o 12

jobs. In addition, the study noted that the state’s deepwa-ter port, the Port o Savannah, produces $66.9 billion insales (9.5 percent o Georgia’s total sales); $32.4 billion inthe state gross domestic product (7.8 percent o Georgia’stotal GDP); $18.5 billion in income (5.2 percent o Geor-gia’s total personal income); and $4.5 billion, $1.4 billionand $1.1 billion in federal, state, and local tax revenuesrespectively.




A report released by the South Carolina State Ports Au-thority in October 2011 noted that international tradethrough South Carolina ports facilitated 280,600 jobsacross the state in the maritime, transportation, distri-

bution and manufacturing industries while providing anoverall economic impact o $45 billion each year. Anotherstudy released jointly by the Ports Association o Louisianaand the Louisiana Department o Transportation and De-

velopment in May 2012 documented that Louisiana’s portsystem is an “enabler” and serves as a launch pad for thestate’s ive major industries (oil and gas, transportation,warehousing, agriculture and manufacturing) as viableparts o the state’s economic base. This study document-ed that more than 396,000 Louisiana jobs are tied directlyto a statewide maritime community spearheaded by the30-plus deepwater and shallow-water ports spread acrossthe state, resulting in $19.5 billion in personal earnings.Similarly, according to a study from the North CarolinaState University Institute for Transportation Research

and Education, North Carolina’s ports support more than65,000 jobs across the state, both directly and indirectly. Inaddition, wages from those jobs exceed the average annualwages in 91 o the state’s 100 counties.

Similar trends are evident at the region’s other ports;indisputably, a thriving port results in tremendous eco-nomic activity that generates a range o positive outcomes.There is sustained interest in the region’s ports to capture

as much o the enhanced trade lowing through the Canalas a means to generate additional economic activity notonly around the port, but across the state.

Also important in accounting for the infrastructure en-hancements at ports along the Gul and East Coast is thestrong speculation that the expansion o the Panama Ca-nal will lead to these ports advancing at the expense o the

West Coast ports.* A principal feature o trade statisticsrelating to U.S. ports in the last two decades has been theincreasing dominance o a number o Southern ports. Inanticipation o the expanded Panama Canal, this has be-come even more pronounced, with a number o Eastand Gul Coast ports initiating an assortment o speciicmeasures to wrest away a greater portion o the cargo (pri-marily from Asia) delivered to West Coast ports.

The ports o Los Angeles and Long Beach have playedan inluential role in national cargo trends (some 40 per-

cent o all container cargo trafic into the United Statesstill arrives at these two ports) for decades now and, untilquite recently, the strategy was to clear the goods of ar-riving vessels at these ports and then move the goods bytruck and rail to their inal destinations across the coun-try. In recent years, there has been a transformation o

* For a more expansive description o this trend, see CanagaRetna, Sujit M. The Panama Canal Expansion and SLC State Ports June 2010, pages 8-16.

Source: A.P Moeller Mærsk Group, 2011 Service Schedule (as presented in http://www.iwr.usace.army.mil/docs/portswaterways/rpt/June_20_U.S._Port_and_Inland_Waterways_Preparing_for_Post_Panamax_Vessels.pdf )

Figure 3 Possible Direct Route rom Asia to East Coast through the Panama Canal




this decades-long strategy, precipitated by several factors,including: labor unrest at the West Coast ports; the move

by shipping companies and distributors to explore low-er-cost alternatives; lack o land for expansion at WestCoast ports; and rail capacity that is signiicantly lower atthese ports. Consequently, there has been a drop in cargovolume arriving at West Coast ports. Based on these de-velopments, the emerging consensus is that the expansion

o the Panama Canal will facilitate further the movementaway from West Coast ports, especially given the increas-ingly larger vessels that will be able to operate through theCanal and call at select East and Gul Coast ports. Conse-quently, these ports have seized the opportunity to securea greater proportion o the cargo volumes entering anddeparting the United States. Figure 3 provides a graphi-cal representation o possible routes directly from Asia tothe East Coast.

A number o ports on the East and Gul Coasts initiat-ed efforts to compete aggressively against each other tosecure a greater share o the increase in global trade re-lated to the expansion o the Panama Canal. The effortso some o these ports received a considerable boost in Ju-ly 2012, when as part o its ‘We Can’t Wait initiative’, theObama administration announced that seven nationallyand regionally signiicant infrastructure projects will beexpedited to help modernize and expand ive major portsin the United States, including the Port o Jacksonville,Port o Miami, Port o Savannah, Port o New York andNew Jersey, and Port o Charleston. Importantly, four othese ive ports are in the SLC. One o the critical pre-

liminary steps in modernizing and expanding these SLCports involves inalizing the federal feasibility studies thatexamine the costs and beneits o deepening their channeldepths. While these federal feasibility studies take an av-erage o 10 years, the expedited process announced by theObama administration commits the federal government toinalize the study years ahead o previous projections. Inthe instances o the ports o Jacksonville, Miami, Charles-ton and New York and New Jersey, the expedited processwill enable these ports to reach a channel depth o 50 feetwell ahead o schedule, a critical factor in attracting trafic

transiting the expanded Panama Canal.

The descriptions following provide a glimpse into some othe SLC ports that are enhancing their infrastructure ca-pacities in preparation for the Canal’s expansion:

» Port o Savannah: The Georgia Ports Authority, theentity overseeing the administration o the Port o Sa-vannah and the other ports in the state, embarked on a

comprehensive effort to both expand and modernize ev-ery aspect o the Port’s operations. A hallmark o thisexpansion effort is the Savannah Harbor ExpansionProject, a collaboration between federal and other stateagencies to deepen the Savannah River from 42 feet to 48feet. This is a $652 million deepening project that bringtotal dedicated state dollars, including the funds passed

by the General Assembly as part o Governor Nathan

Deal’s iscal year 2013 budget request, to $181.1 millionThe Georgia Ports Authority documents that for everydollar the federal government spends on the project, thenation will see $5.5 dollars in beneits via lowered coststo bring goods to market. The Port o Savannah’s recordin recent years has been most impressive, accomplishingstrong growth in breakbulk and auto cargoes alongsiderecord volumes in total tonnage and container trafic.

» Port o Charleston: The South Carolina State Ports Authority’s major deepwater port is the Port o Charlestonanother critical port on the East Coast. For the irst sixmonths o 2012, the Port o Charleston was the fastest-growing top 10 container port in the United States withvolumes expanding by 7.4 percent. In preparation forthe Panama Canal expansion and expected routine lowo Post-Panamax vessels, the Port o Charleston has fo-cused on its own harbor deepening project. In 2012, thiseffort was boosted signiicantly when the South Caroli-na General Assembly moved to fully fund the project’sconstruction phase by setting aside the entire $300 mil-lion estimated cost. This allocation not only wouldcover the state’s 60 percent share, or $180 million, o the

cost, but it also would fund the federal share o deepen-ing Charleston Harbor to 50 feet or greater (from thecurrent 45 feet), i needed.

» Port o New Orleans: Ever since it was founded in 1718New Orleans has been a focal point for global tradeConsequently, the Port o New Orleans is one o themost signiicant in the nation, ranking in the top 10 forcargoes ranging from imported steel, natural rubberplywood and coffee. In preparation for the Panama Canal expansion, the Port is ramping up expansion projects

amounting to more than $400 million in new state-of-the-art facilities, including improved breakbulk andcontainer terminals, new multipurpose gantry cranesexpanded marshalling yards and a new roadway to han-dle truck trafic.

» Port o Virginia: The Virginia Ports Authority (VPA)which owns and operates the Port o Virginia, touts itsability to handle the required channel depth o 50 feet to




55 feet and height clearance (approximately 50 feet) o

the Post-Panamax vessel class that will be more routineafter the Panama Canal expansion. The Virginia PortsAuthority has been working assiduously for the pastsix years to prepare for the Canal expansion, includingleasing the sizable APMT Intermodal Terminal at Ports-mouth, expanding capacity at the Norfolk InternationalTerminal and enhancing infrastructure capabilities atthe Craney Island, a $2.2 billion multi-phase terminalproject. At the APMT Intermodal Terminal, the Portoperates eight Post-Panamax cranes, bringing to a to-tal o 22 the container cranes that are Panamax-class and

larger. The Port’s multimodal capabilities, including thedouble-stack rail lines to Chicago, also remain a majorattraction.

» Port o Brownsville: The only deepwater port directlyon the U.S.-Mexico border, the Port o Brownsville is acritical linchpin in the movement o goods between theUnited States and Mexico and to other global locations.In anticipation o the extra shipping activity and added

cargo volumes after the Panama Canal expansion, the

Port currently has invested $90 million in infrastructureprojects, including multimodal options. Eddie Campi-rano, port director and CEO, notes that it is imperativethat the Port o Brownsville moves toward deepeningits channel depth from the current 42-foot draft to 50feet. He notes that, “Enlarging the channel isn’t a luxuryrather, it is a necessity to take full advantage o grow-ing cargo activity in the Gul in coming years, not tomention the Port’s prime geographical location on thedoorstep o Latin America.” Toward this goal, a $3.6 million feasibility study on widening and deepening is more

than half-done.

» Port o Miami: The Port o Miami has focused intense-ly on preparing for the onset o Post-Panamax vessels inmultiple ways. One o the ways is with its harbor deep-ening or dredging project. In August 2012, the Port oMiami and the U.S. Army Corps o Engineers signedthe construction agreement permitting the Port’s Deep

Dredge project to go out for bid. The Deep Dredge seeks to

The MSC Roma , pictured on the top right, measures 1,105 feet long by 150 feet wide and is capable o carrying up to 9,200 TEU. Photo courtesy othe Port o Savannah.




deepen the Port’s existing 42-foot channels to between 50feet and 52 feet in preparation for the Panama Canal ex-pansion. It is expected that this deepening project willcost about $1 billion and completed around the same timethat the Panama Canal expansion project is completed.Second, the Port is leading the way in constructing thePortMiami Tunnel , a public-private partnership betweenMiami Access Tunnel, Florida Department o Transpor-

tation, Miami-Dade County and the City o Miami in building two tunnel tubes under Biscayne Bay linkingthe Port o Miami with the mainland. Experts maintainthat the tunnel is critical to the Port’s future growth sinceit will enable port trafic to move seamlessly to and fromthe Interstate System while signiicantly reduce traficin downtown Miami. The PortMiami Tunnel project isexpected to cost $1 billion and, while construction on it

began May 2010, it is expected to be completed by May2014. The Port o Miami also is working on redeveloping80 acres o cargo terminal area, a measure that will gener-ate greater eficiencies in cargo terminal operations.

» Port o Wilmington: The North Carolina State PortsAuthority (NCSPA) operates a number o facilities in-cluding the Port o Wilmington, along with the Port oMorehead City, plus inland terminals in Charlotte andin the Piedmont Triad at Greensboro. In January 2012,the NCSPA announced that it had renewed its strategicalliance with the Panama Canal Authority with the sign-ing o an Memorandum o Understanding (MOU). ThisMOU reafirmed both entities’ dedication to generatingnew business and promoting an “all-water-route” once

the expansion o the Panama Canal is completed. As thechairman o the NCSPA Board o Directors noted, “two-thirds o the cargo handled at North Carolina’s Portstransits through the Panama Canal and we look forwardto the next ive years o our renewed partnership, espe-cially the eagerly anticipated completion o the PanamaCanal expansion.”

» Port o Houston: In March 2012, the Port o Houstonannounced the introduction o a new all-water service,connecting Asia and Houston via the Panama Canal.

Vessels from COSCO Container Lines Americas willtravel between Shanghai and Houston (transiting the Ca-nal) in what has been termed the Gul o Mexico Express(GME) service. GME becomes the irst direct contain-er liner service from China to call at the Port o Houstonin nearly 10 years and is a strong indication o the thriv-ing shipping activity forecasted between Asia and theGul Coast (via the Canal) in coming years. The Port o

Houston has a strategic plan in place to take advantageo its natural advantages along with enhancing its capac-ities by building irst-class container facilities (at boththe Bayport Terminal and the Barbours Cut Terminal)rejuvenating the Port’s general cargo facilities and busi-ness practices while eficiently accommodating a diversecargo portfolio; maintaining and improving the Port oHouston’s ship channel (currently at 45 feet deep and

530 feet wide) and its tributaries to meet current and fu-ture navigation needs; leveraging the local and regionaltransportation systems and expanding the footprint othe Port’s logistics links including roads, rail and bargesheightening the value and function o the Port’s variedreal estate assets; and optimizing the Port’s inancial position in response to marketplace and business demands

In conclusion, there is considerable optimism that the U.Sexports market will continue with its current growth tra-

jectory and increase substantially in coming years oncethe economic situation in Europe and Asia stabilizes. Asexpected, U.S. global trade is expected to lourish in thecoming years with the ongoing expansion o the PanamaCanal, a critical link in the transportation o goods to andfrom the United States, playing a dominant role in pro-moting these trade linkages. The potential for additionacargo being ferried to East and Gul Coast ports and awayfrom West Coast ports has resulted in a lurry o activityin a number o SLC ports as they prepare for both the ex-pansion in cargo volume and vessel size. Importantly, poroficials and policymakers do not view the cargo expectedto arrive at East and Gul Coast ports as a zero-sum game

and are conident that the increase in cargo volumes withthe Panama Canal expansion will be substantial which, inturn, will provide incredible opportunities for a numbero ports. Policymakers at every level o government realize the tremendous economic prospects, not only in themanufacturing o export items, but also in the activitieso the ports and related multimodal transportation solu-tions. As a result, important infrastructure enhancementsare underway in a number o SLC ports given the in-creased anticipation that an even greater portion o futureU.S. exports and imports will transit through a Southern

port. In fact, it is heartening to see policymakers at every level o government – federal, state and local – alongwith partners in the private sector working collaboratively to initiate the kind o infrastructure improvements atthe region’s ports to not only prepare for the onset o Post-Panamax vessels that will surface with the completion othe Panama Canal, but also to enhance the economic po-tential o their individual cities, states and region.



THE SOUTHERN OFFICE OF THE COUNCIL OF STATE GOVERNMENTSPO Box 98129 | Atlanta, Georgia 30359

h 4 4/6 66 | f 4 4/6 4 6 | l l

SERVING THE SOUTH

F

ounded in 1947, the Southern Legislative Con-ference (SLC) is the largest o four regionallegislative groups operating under The Council o

State Governments and comprises the states o Al-abama, Arkansas, Florida, Georgia, Kentucky, Louisiana,Mississippi, Missouri, North Carolina, Oklahoma, SouthCarolina, Tennessee, Texas, Virginia and West Virginia.

The mission o the Southern Ofice/Southern LegislativeConference is to foster and encourage intergovernmen-tal cooperation among its 15-member states. In largemeasure this is achieved through the meetings, publica-tions and policy positions o the Conference’s six standingCommittees. Committee members are appointed by their

chamber’s legislative leadership and each committee electsits own oficers. Through the deliberations o committeemembers, an array o issues facing all Southern state legis-latures is considered.

The Southern Legislative Conference is the Southern Of-ice o The Council o State Governments (CSG), the onlynational organization serving all three branches o state

government. As a national organization with a regionastructure, CSG is uniquely positioned to provide a forumfor dialogue and discovery among state policymakers and

to promote the interests o states at the national level.

The Council o State Governments was founded dur-ing the Great Depression and, for nearly 80 years, CSGhas worked hard to provide state leaders with what theyneed to succeed in dificult times. The members o CSGinclude every elected and appointed state and territori-al oficial in the United States. Through our committeesand task forces, supported by our exceptional team opolicy and research specialists, the SLC considers andmakes recommendations on promising approaches to

public policy.

This report was prepared by Sujit M. CanagaRetna, se-nior iscal analyst, for the Economic DevelopmentTransportation and Cultural Affairs Committee o theSouthern Legislative Conference o The Council o StateGovernments, under the chairmanship o Senator BillSample, Arkansas.

THE SOUTHERN OFFICE OF THE COUNCIL OF STATE GOVERNMENTS

Report References

CanagaRetna, Sujit M. The Panama Canal Expansion and SLC State Ports, June 2010.

Reagan, Brad. The Panama Canal’s Ultimate Upgrade, Popular Mechanics, October 2009.

“The Canal Gets Bigger, and U.S. Ports are Ready,” Business Facilities, April 1st, 2011.

“Panama Canal’s Growth Prompts U.S. Ports to Expand,” The New York Times, August 20, 2012

“Quijano Prepares for New Job as Panama Canal Authority Administrator,” The Journal o Commerce, May 28, 2012.

“Charleston Harbor Deepening News,” Channel Markers, South Carolina Ports, July 2012.

“We Can’t Wait: Obama Administration Announces 5 Major Port Projects to Be Expedited,” Ofice o the Press Secretary –The White House, July 19, 2012.

“Expansion Program,” Panama Canal Authority, htp://www.pancanal.com (Accessed August 20, 2012).

http://www.portofhouston.com/

http://www.portobrownsville.com/

http://www.gaports.com/

http://www.port-of-charleston.com/

http://www.miamidade.gov/portofmiami/

http://www.portofvirginia.com/

http://www.portno.com/

http://www.ncports.com/

Alemán Zubieta, Alberto, administrator and CEO o the Panama Canal Authority, presentation at the SouthernGovernors’ Association Annual Meeting, August 10, 2012.

update: the panama canal expansion and the slc states

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