Port of Long Beach’s Al Moro Updates Infrastructure Challenges and Initiatives

Everybody has ridden on the transit system, everybody’s gone to the airport, and a lot of you know about the ports. There’s no reason to go there—it’s a commercial shipping facility. We accept, obviously, the local market here, but 40 percent of the nation’s goods come through the Ports of Los Angeles and Long Beach. Fifteen percent of the nation’s water-borne cargo goes over the Gerald Desmond Bridge.
    We’re a significant force nation-wide, we’re an international player, and we’re very large. We’re the second largest port in the nation—the Port of LA is the largest in terms of the metric of containers moved. We’ve been in existence for over a hundred years, and we plan on being here another hundred years. Cargo from our port—just the Port of Long Beach—touches every congressional district in the United States. We did a study on it—there’s not a single congressional district that doesn’t have a piece of cargo, often a lot of cargo, that goes through our port.
    The second biggest in the US and eighth in the world—we are a landmark port. We’ve developed these massive terminal complexes. We sign long-term leases with our tenants and shipping lines, and that generates our revenue, which we reinvest back into the development and operation of the port.
    If you look at the globe strategically, we’re perfectly placed to feed the US, and most of the Pacific Rim Countries are exporters into the US. We’re a consuming nation, and China is our biggest partner by far—well over 80 percent of our business is with China.
    But we’re facing some challenges. There are ports up in Canada with a partially subsidized railroad system that’s helping cargo move to Chicago, and there are threats down in Mexico. We have competition right here in California—there’s the Port of Oakland that’s trying to get rolling again. Seattle is aggressively seeking cargo to take it from Southern California, and what they promote is, “We don’t have the green-port fees up here.” While we don’t really have fees, we do have a lot of conditions and environmental covenants we impose on our operators, but for good reason: dramatic improvements in air quality.
    Another threat is the Panama Canal. We had our representatives from South America up just a month or two ago, and the latest is that that project is falling a little bit behind schedule, so expect to see it open new lots in early 2015; they were targeting 2014.
    Clearly, the Gulf States and the South East are big population centers, and they are competing fiercely for money from our federal government to improve their ports, to take cargo into their port through the Panama Canal. Now we are partnering with the two big railroads, BNSF and Union Pacific, and you can bet they are not going to let that go lightly. They want to serve that market from our port, and there’s a lot of infrastructure they’ve invested in. They’re not going to just sit idle and be priced-out.
    Another challenge is a trend in the industry: in the last fifteen years, vessels have increased in size. That means for us, in terms of building infrastructure, it’s a real domino effect. It’s more than just deep water—these large vessels are massive. Just for wharf structure, vessels this big need larger cranes. The area behind the wharf structure has to be enlarged because we have so much cargo passing through at one time, and the operations in that terminal need to take that cargo in an efficient way and carry it to the rail, to the trucks, and through the gate quickly in order to keep up.
    Just a couple of weeks ago, the MSC Beatrice, the largest container vessel to call in North America, called at our facility. The MSC Beatrice carries 15,800 20-foot-equivalent boxes. It’s about 12,000 feet long, and if it stood upright it’d almost be as tall as the Empire State Building.
    This is a real trend; these vessels are being introduced to the fleet. One good thing is that the MSC Beatrice will not fit through the brand new Panama Canal. The locks are too small for that sized ship, and the trend is to get even bigger. On paper, a naval architect is developing 18,000 TEU vessels. So when the port says we’re big-ship ready, we’re pretty serious about that. The ports in the Gulf States and the East and Southeast Coasts are fighting for federal money to get deeper water, but, frankly, they have a lot more to do—the wharf structures, the area behind it, the arterials, the transportation network, all must be updated if they’re going to attract these vessels. My guess is, some of that discretionary cargo that we’re fighting for will get diverted, but it won’t be where the trend in the industry is.
    We have to deal with three modes of transportation. We have roadways for trucks and cars; we have rail for rail cargo; and then we have waterways. A major infrastructure project that we’re doing is the replacement in the Gerald Desmond Bridge. This is a design-built facility. The project has been awarded, and the primary builder is the Shimmick Construction Company. We did a best value qualifications selection, looked at their qualifications, and then we opened a price proposal. It’s a $650 million construction project; it has about a $950 million budget. Right now, being a design-build, the designers are submitting a lot of very detailed designs, meeting our performance specs, and about late first quarter next year you’ll see some big equipment out there.
    They’ll start on the deep foundations for the main towers. It’s a cable-stayed structure, which accomplishes a couple of things. The old bridge is too low above the water for the large vessels, and there are effectively only two lanes in each direction with no shoulders. This will create three lanes in each direction with shoulders. Today, when a truck breaks down or stalls on a bridge, it’s total chaos. The trucks try to find alternative routes on local streets, and it messes up everything. About 80,000 vehicles and/or trucks drive over the bridge per week.
    The towers are about 500-550 feet in the air, and the new deck will be 200 feet above the water. We conducted a study with the major ports around the world, and some ports in the world that have that same restriction—we’re hoping the naval architects don’t build the vessels any bigger than that. The bridge also will have a pedestrian and bike access-way on the south side. It’s being built just immediately north of the existing Gerald Desmond Bridge, and it will provide an excellent view of the downtown skyline as well as the port.
    Shifting modes to rail, right now, about 20 percent of the cargo we handle goes from the ship within the terminal to an on-dock rail facility. Our goal with the rail master plan (and it really links in to our clean air action-plan) is to get more cargo on rail. It’s very efficient, it’s very clean, and, of course, it removes a lot of congestion from the highways and freeways. So we have a number of rail projects.
    Our rail projects over the next ten years are a combination of very simple projects to make our 85 miles of rail more efficient, and some pretty major projects where we’ll relieve the terminals that have to be relatively free to handle the cargo to support yards within the court complex. Over ten years we’ve got about a billion dollars worth of rail projects. Our first big one has been awarded to Ames, and that project will start in November and will last about a year and a half. It’s going to double the tracks that lead down to the southeast portion of our port complex. We have two tracks serving the facilities down there, and we want to have four, clearing the right away for an additional two somewhere down the line.
    In terms of navigation, those large vessels, fortunately, have very deep water. The main channel leading to one of our oil terminals is 76 feet, and that’s unheard of in most ports, which may be lucky to have 45-50 feet. In general, we have about 55-foot-deep water, and the problem we’re facing is these large vessels are not necessarily getting deeper, but they’re getting longer and wider. Thus we have to broaden and reinforce the side slopes—it’s very expensive. It’s not easy to do, and we’re fortunate to have some landfills going on. The navigation is just another element that we face that’s pretty unique to a shipping port.
    Our Middle Harbor Project is an investment of about a billion-dollars by the Port, with another $50 million being invested by our customers. OOCL shipping line and Long Beach container terminal are going to make a combined investment of about $500 million in equipment to run that terminal. It’s going to have a wharf-structured facility that will handle those large vessels. Today, cranes almost all over the world pick up one box at a time. These cranes will be able to pick up two boxes at a time, so you can see how efficiency is gained. A robotic vehicle will bring cargo to the center core, and a computerized system will mix and match that at all hours of the day, queue it up to the inland side, and the trucks will come and either take it to the rail yard or out through the truck system. The best metric for that project is that we’re going to double the capacity of that area in our terminal. Right now, we can handle about 1.5 million boxes—that’s going to be up to 3.3 million boxes. At the same time, we’re going to cut harmful pollution in half.
    One challenge is clearly cost. These projects are very expensive, and these structures are becoming massive. On the Middle Harbor Project we had to sign a 40-year lease on a very slim margin of return on our investment because the project is so expensive with these massive structures and automated systems. We’re seeking all kinds of help: local, state, and federal funding. But we’re finding that we have to be very cautious about that because sometimes it’s easy to get the money, but then there are so many strings attached, like jobs. We’re somewhat restricted with our funds with the Tidelands Act, but also our community is suffering from the poor economy, and our city council members and our harbor commissioners want local jobs. It’s hard to sit there and tell them we can’t. So we’re good enough to absorb all this congestion, all this harmful pollution, but we’re not good enough to have our jobs down at the Port.
    The point that I’m making here is that we’ve gotten smarter. We’ve actually developed a grant process committee where we look at the strings attached before we dive in headfirst and take a grant because it looks very attractive financially.
    What we’ve done on the environment, we clearly go above and beyond what is required by regulations. We individually meet with regulators and elected officials, and we provide them courtesy reviews of the regulatory agencies, so there’s a lot of collaboration when we go through these efforts. We actually have two teams of peers, one on the technical aspects of our environmental documents—specialists in air quality, in forecasting traffic flow—as well a legal board that looks at our documents and makes sure they’re going to hold up and be defensible legally, because we’re always challenged. It’s not just the Port but also all these massive projects, like the 710. A peer review takes a lot of time and money, but it’s the way we’re doing business today.