Cleaning Up Goods Movement Amidst Unprecedented Reconfiguration Of The Supply Chain—The Ports/710 Corridor: VX 2022 Panel

Jim Kelly: Clearly, we’re real proud of our San Pedro Bay ports, both the Port of Los Angeles and the Port of Long Beach, for being global models for the greening of ports. If you look at the Clean Air Action Plan that the ports have adopted, they have set records that nobody else in the world is touching. Examples include a 90 percent reduction in diesel particulate emissions and 60 percent increase in wildlife diversity.

 In the last couple of years, our picture of the ports has shifted a bit. When you think of the ports right now, what do you think of? 100 ships offshore? That's what the public has been seeing on the news night after night. They've been saying there's this supply chain crisis. They always pan to an empty Walmart shelf, and they say, “see what this caused.” Of course, we understand that the relationship is far more complex than that, but this has been what we've seen in this supply chain crisis.

Part of what we want to do today is talk about the truth and the reality of what's been going on at the ports. What we're doing now, how we've solved some of these problems,  some of the solutions that are yet to come, and some of the challenges that are still being faced as far as emissions go. We're going to hear a little bit here from Toyota in terms of the stuff that they're doing with hydrogen, for example.

…

What we're going to do is let each of our panelists give you their perspective on what's really happening, what you've been hearing, what the truth is, and where we're headed. Mario, do you want to kick us off?

Mario Cordero: It's exciting to be here with all of you, especially with these great panel members. A lot of reason why we're here in terms of the progress the state of California has made on the climate change has been by people like Hector, who has been a very strong advocate of moving the needle with regard to what we need to do to address, particularly, air pollution.

From my perspective, there is a perception out there that the ports haven't done much. I think we need to tell our story because the fact of the matter is, both the Port of Long Beach and the Port of Los Angeles are recognized environmental stewards. There is no port complex in the nation, much less the world, that has done as much as we have to reduce emissions. Our goal is to eradicate emissions. For an industry sector to have that goal that was announced in November 2017, it's just amazing what we've been able to accomplish.

This all started for the Port of Long Beach with the announcement of the Green Port Policy back in January 2005. It was a five-point plan of action to essentially do what we commonly know today as ESG: environmental, social, and governance. For the Port of Long Beach, that was our ESG before people even used that term.

I'm very proud to stand here to say that because of the staff that we've had at the Port of Long Beach, beginning in those years, we have accomplished much. You have the Deputy Director here, Rick Cameron, who at the time was a younger staff person who worked on the Green Port Policy from day one. Along with Heather Tomley, who is still with the Port, we've accomplished a lot. It's not so much what I've done; it's about what the staff has done.

Today, I will announce the facts; we're not going to talk about perception. The fact of the matter is that as of June 2022, the Port of Long Beach is the port that has the most zero-emission yard tractors of any other port in the country, the largest demonstration of zero-emission cargo handling equipment of any port. It’s also the first port to develop and implement fast charging stations. We've been able to do that because of $80 million in grants that we received from the state of California, aside from the money that we invest in our private sector partners.

Next, I’ll talk about the Clean Air Action Plan. A lot of it is to put more of this containerized movement of cargo on rail as opposed to truck. I think we all agree that in a greater metropolitan area, the fewer trucks we have on our corridors, the better. Obviously, I don't think the 710 is going to go anywhere in terms of expansion. Clearly, the more we put on-dock, the better, so we have some exciting rail projects.

Here's what we've been able to do as the port complex, including the Port of LA. We saw a 90 percent reduction in diesel soot, nitrous oxides are down 62 percent, and 97 percent down for sulfur oxides. We're not finished; our goal is zero.

Now, much is being said about the supply chain. We’re in a very unique era. The good news is, we have the Biden administration, who is very much engaged in supply chain, and at the same time, engaged in the issue of climate change. It's a golden age for the ports. We are finally getting attention from both Sacramento and Washington towards the infrastructure we need in these ports.

As you many of you may have read or heard me speak about, we're not going to go 24 hours a day, seven days a week anytime soon, but we do need to expand gate hours. We do need to distribute the amount of cargo that comes to this complex. There has been a lot of conversation about the top 10 ports in a container performance index that was released. What's the common denominator? Those ports are 24/7.

Lastly, there is a lot of conversation about zero emission trucks. In 2019, we had 7663 trucks that are from 2007-2009. Now, two years later, that number went down to 5902, which tells you that in those last couple years, we had transitioned 1562 trucks. I think we missed a great opportunity to push near zero in the last couple years. Of those new 1562 trucks, only 161 are liquified natural gas. Right now in the Port of Long Beach, we have, 20 zero-emission trucks. The good news is we're going to get to our goal before 2035. I'm not too sure we're going to get there in the next couple years, but we've made great strides as ports to move forward with this agenda.

Hector De La Torre: When you look at the MATES V study, you can see incredible progress throughout the South Coast Air basin. This is about the cancer-causing effect of air pollution. We’ve made incredible progress wiping out the purple, except in one place: the port complex. Mario and David, I acknowledge the progress that the ports have made, but this and many other charts like it don't lie, we have a lot more to do.

I do want to say that I'm speaking for myself as an Air Resources Board Member.

The things that I'm telling you are a compilation of things that I've seen and heard and participated in on a regular basis there. I'm not just making this stuff up, but I'm not speaking for the full board.

I also want to say that a plan is not the thing. The thing is the thing. As we're moving forward, there are a lot of references to the plan. Well, we want to see the thing. We want to see the changes that are needed.

A perfect example is the container fee. Unfortunately, Arnold Schwarzenegger vetoed it. A $10 fee was approved by the Board two years ago and was just implemented two months ago. I checked with Bob Foster today what the fee was that he did as the mayor of Long Beach around 2005-2006. That was $40. We have gone backwards $30 in that time period. I think we could do more. This container fee took two years to implement and that money would have come really in handy for the transition to zero that we all say that we want.

One of the things that's been used a lot of times by both ports to defend inaction has been diversion, that miraculously all these ships are going to go elsewhere. In these last two years, if anything was going to get them to divert, it was going to be the things that Jim was talking about. They didn't. Instead, they prefer to sit offshore here and wait their turn to come in and unload. They want to be here, and we want them to be here, but the alternative is one of two things: dirty stagnation or clean growth. You want growth, but it's got to be clean for those communities that are right next to the ports. Various projects to expand port activities have not included mitigation efforts or efforts to ensure zero-emission movement. China Shipping, Pier B on-dock rail, and SCIG are all missed significant mitigation opportunities.

The ports did not engage in meaningful negotiations with South Coast on an MOU for an indirect source rule. All of this basin was under one indirect source rule, except for the place that needed it most: the ports. As I stand here today, there is no indirect source rule at the ports. That is another missed opportunity.

The ports will talk about the grant money that they've given out to plant trees or to put air filters in school classrooms or expand asthma support services. Again, that's not the thing. The thing is to eliminate the emissions so that those kids and those neighbors don't have to breathe that crap. Again, clean growth or dirty stagnation is the path forward.

What can they do? Immediately increase the truck rate and use those funds to help purchase only zero emission trucks. They can clearly communicate that combustion in any vehicles or equipment is not a solution. They can build on the 2021 demonstration of a zero-emission switch locomotive project and transition to zero-emission locomotives. Commit funding for infrastructure and integrate infrastructure development costs into new tenant lease agreements. Step up and provide an Infrastructure Action Plan by the end of this year. We need to see how are you going to do this specific piece of the puzzle. Finally, they can create a Green Fast Pass. If you have a zero-emission truck, you should be able to get in and out quicker to make that more valuable to the trucking and shipping companies. Those are just some ideas. I'm sure Tak is going to give us some more good ones in a little bit.

I acknowledge the progress, but again, look what is happening to the people who live right there. That's who you are responsible to. They're your neighbors. When I get on the 710 freeway every day because I live right by it, I want to see cleaner drayage trucks. We're going to help. We poured all kinds of money in the last couple of budgets, and we're going to continue to do this, but we need you as more of a partner for us.

David Libatique: I'm David Libatique, Deputy Executive Director for Stakeholder Engagement for the Port of Los Angeles. I’m not going to argue with anything that Hector just covered; I agree with him. We need to find a path forward, and there's more we should be doing on multiple fronts. What I'm going to cover is what we see as the rubric or lens by which we think progress can be made, given the backdrop we currently see.

The first thing most people think of is exactly what Jim started with. They think of ships backed up out in the ocean. They think of empty store shelves. Without a doubt, we've been experiencing years of disruption. Disruption is now the norm, starting with the trade war. It used to be like clockwork, cargo coming through the ports and then very mechanistically moving on to truck or rail and out into the interior of the US. All that got thrown for a loop with the trade war, and we started seeing rushes of cargo to beat tariff milestones in 2018 and 2019.

Fast forward to 2020. The pandemic hits, and you have factory shutdowns, a huge supply shock on the global and national supply chain. We had, on one count, 40 canceled sailings in San Pedro Bay in the month of April of 2020. We thought the volume was not coming back, but we were wrong. It rushed back with a fury in the Summer of 2020 and sustained very high levels. You had the infusion of large federal stimulus dollars into the economy and the shift from services to goods consumption. These high volumes goods were coming through the ports of LA and Long Beach.

With the e-commerce boom, warehouses got full. What happened is that shippers, to mitigate the risk that they were seeing, decided to stock up on inventories. Those inventories were either being held in warehouses or they were being held in containers, tying up the equipment that needed to cycle back into the system to bring out the next load of imports. Then, the whole system seizes, and we didn't see that just at the marine terminals. We also saw it at the inland rail terminals. That was summer 2021, and we continue to try and dig out of that.

In the midst of all this, you see cargo getting stuck in terminals or in rail yards and fees racking up for those shippers. The shippers are screaming bloody murder because now they're being charged attention and demurrage. You're seeing now supply chain costs driving inflation. That's why you have the president talking about how dealing with supply chain issues is central to his strategy to try and reduce inflation. That's the backdrop.

What we see as a productive way forward is first, we do need to deal with system resiliency. We have alignment from, as Mario alluded to, the federal, state, and local governments that we haven't seen before. There is an availability of funding and a focus on supply chain resiliency. We see investments to make the system more robust and efficient. That includes cargo support facilities. We need to inject reliability back into the system, lower costs, get greater efficiency, and minimize the handling and re-handling of cargo throughout the system, which just leads to more emissions,

For workforce training and development, we need to systematize how we view creation of jobs in the goods movement supply chain. We need to create a space to professionalize and reskill workers across the supply chain. Longshore showed up every day, but among warehouses and truckers, we did see a loss of capacity. We need to address that, and we think a workforce training campus that the two ports are working on is going to help solve that.

 Then, there’s the community and environmental impacts when you have the warehouses fill up, cargo back up into terminals, ships back down into the ocean, and equipment stuck in surrounding communities. Those emissions and quality of life impacts are impossible to ignore.

Anything we do moving forward with federal or state plans needs to tick all these boxes. We need to address supply chain disruption, workforce and job creation, and community and environmental impacts.

I'm going to focus on the last one because I think this is what most of the discussion is going to focus on. As Hector mentioned, we did initiate a clean truck fee at $10 per T. That's going to spin off roughly $90 million between the two ports on a yearly basis. We have our Shore to Store Hydrogen Demo. Thanks to our partnership with Toyota, we are now positioned to go after hydrogen hub money, which we see as a huge opportunity. We're going to look at how we can focus near term deployment of zero emission trucks in disadvantaged communities. How do we get near term deployment of a large number of ZEV trucks focused on that short haul dray? Think about the near-dock railyards or surrounding the container yards at service satellite facilities of the marine terminals.

We haven't really stopped working on the Clean Air Action Plan. We'll continue to do so, but again, moving forward, we need to do this. We need to address disruption, and we need to address jobs.

Jim Kelly: Tak-san, tell us about the future.

Tak Yokoo: Actually, it's not the future; it's today.

Let me share about the Port of Los Angeles fuel cell and zero emission experience. We really recognized that port was growing every day in 2013 or 2015. Everybody was saying that you were going to handle double the containers. The problem was staying with diesel trucks, because they’re so dirty.

Toyota is 100 percent committed to zero emission terminal equipment by 2030, which is just seven years away. By 2035, we are committed to 100 percent zero emission trucks. Maybe the equipment should not be just a fuel cell, but also could be a battery. In any case, diesel can be replaced by either battery EV or fuel cell EV. I am sure that diesel is going to disappear, sorry for diesel manufacturing.

Let me start from 2017. We were so proud that we have one zero emission truck out of the 17,000 trucks operating at the Ports of Los Angeles and Long Beach. I started in 2014, and the first time I talked to Mary Nichols and the Port of Los Angeles, they said they needed a zero emission truck. I asked how can we do this? We had 20 years of the passenger fuel cell experience; how can we use that experience to make it happen? Basically everybody denied it for two years. This discussion went up to the President and every chairperson, and they said no. I still believed this was something. I was supported by the Port for zero emission planning. I came back again and again, and finally, they started saying maybe this was important.

Then, the first truck was made. Still, very few people supported me and many people hated me because I spent so much time and money for this truck. It was in the double-digit millions. Then the second truck was maybe single-digit millions. Finally, we were able to get together with the Port of Los Angeles and Shell and Kenworth. Then, Toyota management started saying this was something we should be proud of. I said that's what I told you. Now, we have a really proud total of 14 trucks here. These trucks are getting lots of funding to continue moving forward.

So next year, we're ready to start selling this product. That's why I said it's not the future, it's today. We are going to sell them and all the technology is available now. This group needs to really figure out how to make it actually happen. There is technology available, so why not? We need to do this.

…

Audience Question: Could there be an opportunity for either Port to manage their own trucking?

Mario Cordero: We're a landlord tenant model, so that's not going to be an option, unfortunately. Aside from that, the fact of the matter is we have 21,000 trucks on the registry. Of those 21,000 trucks, only 20 are zero emission. Of those 20, the majority are demonstration projects. The point here is, we have a laudable goal to get to. I agree with Toyota. The end goal here is hydrogen fuel cell. It's not battery electric. We're about maybe five, seven years away from hydro. That truck right now basically costs you $900,000, and an electric truck costs you $500,000.

When you put the onus on the ports, by the way, in California, there are 1.5 million 18 wheelers on the road. It's a singular percentile that are doing port drayage. I think a lot of what the ports have done, given the monies that we have, has been just enormous. I stand by the record that we've done more than any other port authority in the world.

Last, with regard to the $80 million in grants, I just wanted to be clear that that $80 million is towards zero emission investment. If you want to talk about our community grants, that's another $65 million that the Port of Long Beach is investing in community grants.

David Libatique: I agree with Mario. We're not looking at the ports actually operating fleets of trucks, but I think we do need to be open to different models of drayage. Your typical drayage truck driver is purchasing a truck on the secondary, tertiary market at about $50,000. A new near-zero truck is about $150,000. Your zero emission trucks are getting up to $450,000 - $500,000 a pop. We want to foster the development of the market for those ZE trucks and build it out. Maybe we can look at market segments where it makes sense, like land bridge service to the near-dock railyards or to container yards in and around the port complex.

I do believe hydrogen is going to be part of that play. I am not as dismissive at this point on battery electric. I think we really need to look at all options. I think we need to just keep as many tools on the table as possible between policy solutions, financing, making sure there's private sector provision of insurance, and making sure that there's funding from the state and federal governments.