Panama Canal a Long-Term, not Short-Term, Game Changer

Virginia ports rock! But let's not get carried away.

by James A. Bacon

The Virginian-Pilot has published a piece on the “cargo bonanza” potentially awaiting the port of Virginia when the Panama Canal opens its bigger locks, enabling monster container ships to cut their travel times between Asia and the East Coast of the United States. Much of the article recounts background information that will be familiar to readers of this blog. But writer Robert McCabe expands the ongoing conversation in one very important way: West Coast ports and railroads, he notes, know they have a lot to lose, and they are fighting back.

While Virginia’s ports have distinct geographical advantages that give them a shot at winning an outsized share of the increased East Coast container cargo — most notably the deepest channels on the Atlantic — the boon to the state’s maritime industry may be less than meets the eye. McCabe provides a number of  reasons to be cautious.

First, Virginia can’t go it alone. Writes McCabe:

Shipping lines generally call on a series of ports, discharging and taking on cargo at one site after another as part of a “rotation.” So being able to handle the biggest ships might not help one East Coast port if the others aren’t ready.

Peter Tirschwell, senior vice president for strategy at UBM Global Trade, wrote in The Journal of Commerce this month that he doesn’t see a way for Hampton Roads to solve this problem by making itself a sole East Coast cargo destination.

“Given a population base dispersed throughout the mid-Atlantic and a modern inland-rail network that’s still chasing customers rather than the other way around, Virginia isn’t there yet,” he wrote. “It essentially has to wait for the other ports to catch up.”

Second, it will take time to alter deep-rooted trade patterns. Not only will West Coast ports maintain a competitive advantage for time-sensitive products — the oceanic transit takes 11 or 12 days to the West Coast compared to 24 to 26 days to the East Coast — ports and railroads can defend their business by cutting rates. McCabe quotes Tom Finkbiner, former chief of Norfolk Southern’s intermodal operations who now chairs the Intermodal Transportation Institute’s board of directors at the University of Denver. The canal, said Finkbiner, “is not going to divert a lot of West Coast traffic to the East Coast because of all the supply chains set up already. It’s not in the cards.”

It’s perfectly understandable for Virginia port officials to salivate over the growth prospects created by the Panama Canal widening. It’s perfectly appropriate for the McDonnell administration to try to leverage the once-in-a-generation economic-development opportunity. But it’s also important for the state not to get swept up in boosterism.

Of greatest concern to me is the $500 million the administration has allocated to a public-private partnership, still under negotiation, for building an upgraded U.S. 460 that will improve Hampton Roads’ access to Interstates 95 and 85. If so much container traffic is destined to materialize, why can’t financing be structured so that shippers pay for the improvement? If the project is not financially viable without a half-billion dollar public contribution, is the project economically justified?

Don’t mistake my questions as hardened opposition to the U.S. 460 project. I would love to see the Tidewater economy blossom from increased trade. Let’s just say, though, that, based on what I know at this point, I remain unconvinced. The McDonnell administration has hinted at economic-development prospects that might change public perceptions when they come to light. I eagerly await the news.

5 Responses to Panama Canal a Long-Term, not Short-Term, Game Changer

  1. 500 million? A drop in the bucket. There’s billions more on the list. Third crossings, widened roads, new rail, new port, you name it.

  2. any idea that Va ports will handle dramatically increased tonnage and will accommodate it in large part by regional roads is dumb.

    what happens to the increased truck traffic once it leaves US 460?

    we should be looking at what it will take in increased rail infrastructure to move this increase – not roads.

    at the very least – we should be looking at this from a state – not a regional perspective and we should be looking at a comparison of state roads verses state rail for cost/benefits.

    It’s not only developers who have great ideas for tax payers to pay for their business plans… other businesses like ports have the same approach.

    we talk the talk about not taxing businesses because they create jobs but businesses expect and depend on taxpayer-funded infrastructure and what is good for business is not necessarily good for Virginians – as taxpayers or users of transportation corridors.

  3. LarryG, I agree that we should look first to the railroads to haul the container traffic out of Hampton Roads. But Virgiia *is* looking to the railroads first. Norfolk Southern is expanding its capacity to serve the ports, and both NS and CSX are partnering with states to create double-stacking routes to major markets. I’m not sure that there’s a whole lot more that can be done.

  4. we went through this big deal about whether we should expand I-81 or build more rail.

    I was skeptical about the tradeoff between more public road infrastructure vs doing “something” to encourage more private rail infrastructure.

    Of course the whole think came unglued when VDOT suggested the roads be paid for with tolls.

    but this situation is different. The ports are telling us that we’ll likely get more cargo and their solution is to build more regional roads – on the taxpayer dime or in the case of 460 – a tax-payer subsidized toll road.

    here’s what needs to be done.

    we need to model how many more trucks will be coming from the ports and how much they add to I-64, I-95 and I-81.

    and then we need to ask how those roads will be affected by increased truck traffic.

    Can we afford more trucks on I-81 right now?

    How about I-95 north? Can we handle more 18-wheelers going through the Washington area?

    this is a bad approach.

    the ports folks and the Gov tells us this is a good thing and maybe it is but what is going to happen to the roads? Who’s taking responsibility for analyzing that and suggesting what upgrades will be needed and how they will be paid for?

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