Virginia Ports Need More than Rail to Handle Cargo Growth

MSC Roma

by James A. Bacon

In Mid-March the MSC Roma paid a stop at the Port of Virginia. Setting a record for a container ship in Virginia waters, the vessel drew 48 1/2 feet when it departed with export-bound containers. Virginia was the only port on the East Coast with channels deep enough to handle the vessel loaded that heavily.

There are a lot more vessels the size of Roma, says Joe Harris, media relations manager for the ports. “They’re all over the water — they’re just not coming to the East Coast yet.” But they will, he says, and Virginia will see them even before the Panama Canal opens its third, wider canal lock in 2014.

The Virginia Port Authority, railroads, shipping companies, logistics companies and even the state of Virginia are preparing for the boom in East Coast container traffic that will flow from the shift in the shipping industry to ever bigger vessels. The question logically arises, will the Hampton Roads transportation network be able to handle the surge, or will roads and railroads become a bottleneck that constrains growth?

Here at the Bacon’s Rebellion command bunker, we have been investigating the impact of the big-ship revolution on Virginia’s economy from a public policy perspective. How can Virginia business and government maximize the benefits of the big ships? And what public investments make sense? In particular, does the commitment of $500 million in public funds to the U.S. 460 Connector, which would provide a second Interstate-quality highway link between the ports and Interstates 95 and 85, make economic sense?

A spirited debate has taken place in previous blog posts, and Rebellion contributor Peter Galuszka posed a very good question in “Closely Watched Trains.” Norfolk Southern and CSX are investing hundreds of millions of dollars upgrading their rail systems to handle double-stacked trains out of Hampton Roads, he noted. Doesn’t that make the $1.8 billion road project unnecessary?

In answer to that question, here’s what I found: Railroads are most competitive for cargo being shipped 500 miles or more. Norfolk Southern and CSX totally dominate the movement of goods to the Midwest and other points far to the west. But trucks are more competitive for shorter hauls. While the railroads can accommodate some of the growth in container shipments, they cannot handle it all.

The ports move 1.1 million containers yearly. Rail moves about 30% of that traffic, barges 4% and trucks the balance, or about two-thirds. Harris is optimistic that railroads will grab a rising share of a growing market. Norfolk Southern and its public-sector partners have invested $320 million upgrading its Heartland Corridor route to handle double-stacked trains, effectively doubling its capacity to serve Midwest markets from Norfolk. As part of the National Gateway Freight Project, CSX Corp. is spending $165 million on a single improvement, the Virginia Avenue Tunnel in Washington, D.C., to create a double-stacking corridor to Ohio.

Harris is reluctant to forecast container traffic through the Virginia ports because the volume is so dependent upon general economic conditions over which the port has no control. Will the American public start consuming again, he asks. Will retailers continue to boost imports from the Far East? Early in the past decade, the ports showed growth rates of 8% to 9% annually. After taking a big hit during the 2007-2008 recession, the ports now are forecasting a more modest 3% yearly volume growth. That may be conservative. Ship lines and shipping alliances are testing Virginia to see how well the ports handle their big vessels.

Long-term, Harris expects the railroads to increase their inter-modal share to 40% of container traffic, an increase of 10 percentage points. That’s all the more remarkable when you consider that the Virginia ports already move a higher percentage of its containers by rail than any other East Coast port. Rail accounts for only 18% in New York and Savannah.

A rule of thumb is that rail captures the container business to markets more than 500 miles away, while the economics favor trucks for shorter distances, says Quintin Kendall, regional vice president for CSX. That means trucks will predominate in shipments to Mid-Atlantic markets, competing with Baltimore and Philadelphia in the north and Wilmington and Charleston to the south. That business will be highly competitive. As Kendall puts it, Virginia is a “discretionary market” port.

What does this all mean for our analysis of Virginia’s $500 million commitment to the U.S. 460 Connector?

  • Railroads are poised to capture a growing share of the inter-model market for Virginia’s ports, from 30% currently to 40% in the indefinite future.
  • Railroads are less competitive serving markets less than 500 miles away, where truck traffic will predominate.
  • If container traffic increases 3% annually over the next decade, railroads will be able to handle only that portion destined for distant markets. (Barges are a negligible factor.)
  • Truck traffic will increase. The rate of increase may depend upon the degree of congestion on Virginia bridges, tunnels and highways and the ability of competing ports to improve their infrastructure.

Thus, to answer Peter’s query, yes, railroads can handle some of the increase in container shipments over the next decade but only a fraction of it. For Virginia to reach its full economic potential, the commonwealth needs to increase its highway capacity serving Hampton Roads. Failing to increase that capacity could mean foregoing some economic growth, though how much is hard to say.

That still leaves open the question of whether the U.S. 460 Connector is economically justified: $1.8 billion, including $500 million in public dollars, is an immense sum. That money could be invested elsewhere or left in the hands of taxpayers. Alternative investments would have economic benefits of their own. Perhaps the most objective way to address this issue is this: Does the U.S. 460 Connector create enough economic value to support the toll structure required to finance its construction? If so, state government should find a way to make it happen. If not, perhaps the economic justification does not exist.

We’ll dig deeper in a follow-up article.

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  1. Kudos to Mr. Bacon. Where else in Virginia can you find quality analysis of relevant and topical issues?

    In this case, it makes one wonder why Virginia did not run a study comparing 460 to increased rail infrastructure.

    I’ve grown pretty skeptical about VDOT studies. They almost always are per-ordained rather than substantive.

    You can get more honest analysis out of one BR thread that a thousand page VDOT EIS doc.

    That’s what Stewart Schwartz and the folks in C-ville should do. They should do their own environmental documents in the style as VDOTs but do them with honest data that shows just how biased the VDOT studies can be.

  2. How about separate tolled lanes for trucks as is done with the New Jersey Turnpike as one gets closer to New York? US DOT says “Truck lanes operate in much the same fashion as bus-only lanes. However, the objective is different. The goal in separating truck traffic from passenger traffic is to improve the flow of a facility and provide an increased level of safety by reducing possible conflicts between large trucks and other vehicles. Separate truck lanes may be feasible in areas where truck volumes exceed 30 percent of vehicular traffic, peak-hour volumes exceed 1800 vehicles per lane-hour, and off-peak volumes exceed 1200 vehicles per lane-hour (3). Exclusive lanes use vehicle eligibility to achieve operational objectives.”
    Would this fit 460?

  3. the thing about the trucks is that the 460 study seems to not talk about where those trucks go after they leave 460.

    Do we want I-95 and I-66 to look like I-81?

    Do we want even more trucks on I-81 headed to 460?

    I think the truck idea is a really bad idea myself. I’d hate to see our other interstates end up like I-81.

  4. 48 feet. As a skipper, that would scare me to death.

    Accident, waiting to happen.

  5. An aircraft carrier dress around 35 ft. For comparison.

  6. I wonder how much investment the rails would make for additional capacity if they were not facing taxpayer-subsidized competition from roads?

    Isn’t it funny that Conservatives who eschew govt ‘interference” in the economy for things like solar panels and hybrid cars are just fine with DOD/military and Roads?

    Why did the state immediately jump on 460 as the role of govt in the ports issue in the first place? Why did they at least also look at rail and do the road and rail analysis in ONE DOCUMENT?

    I’m not in favor of subsidizing land transportation for the ports in the first place but if we are going to consider it – let’s look at rail also especially before we make I-95 and I-64 into more I-81-like roads.

    I still think Mobile, Alabama has geography in their favor. They already have PanaMax infrastructure and are planning for more despite their shallower waterway depths (which I assume they will deepen).

    The deal in Va with the Ports is that it’s basically risky business that will be ultimately decided by the private sector on a number of factors and we have the state (who may or may not know all the factors) – concluding without any public involvement that road is needed rather than rail AND that the road needs to be subsidized by taxpayers.

    That’s awful policy and it further continues the bad concept that the state can foster economic development with roads – based on “ideas” and unproven premises without, as Jim Bacon has pointed out, not a scintilla of cost/benefit analysis.

    This continues the corrupt political process of road decision-making and encourages each region and locality to continue to engage in political activities, rather than need and cost-benefit.

    To a certain extent, you cannot keep politics out of the process, admittedly but with VDOT basically in the lead and NOT focusing on substantive issues and continuing to reinforce the idea that politics is still the primary process.. you end up with kerfuffles like Dulles vs 460.

    and the money pipe is about empty. If the Feds force transportation to subsist solely on the gas tax and not the general fund – you can kiss goodby construction money and from this point on – the state gas tax will go for maintenance, a very few improvements and toll roads.

    Having said all of this – and even though I disagree with VDOT Policy, I give Sean Connaughton credit for making things happen in a era where previous Govs seemed unable to get any traction/movement on transportation.

    I think that man would probably make a better Gov that the current crop of wannabies.

  7. Peter Galuszka Avatar
    Peter Galuszka

    I am glad you took the trouble to dig into the issue. A 40 percent increase in rail intermodal is indeed nothing to sniff at. However, if the remainder will be truck-borne heading less 500 miles from Tidewater, the question is would have is where to?

    A decade ago, the answer was simple. Trucks would take mostly cheap consumer goods from China and the rest of Asia to big regional warehouses owned by Target Wal-Mart, QVC etc. for distribution east of the Mississippi River. Heavier goods bound for U.S. manufacturing plants would roll on into the industrial Midwest. or perhaps the network of automotive factories in places like Kentucky, Tennessee or Alabama.

    The key of course is whereto? The U.S. should not want to bet the farm on cheaper Chinese goods where increasing labor costs are upsetting their comparative advantage and our ability to absorb them is limited. Ironically, the most thriving areas right now in the U.S. economy seem to be manufacturing in Rust Belt places such as Michigan or Ohio. And since I am personally just as patriotic as any Tea Party weirdo, I chose to buy American when it came time for a new car. I love my new Ford with a passion.

    So, as you consider the next phase of your query, a check into rising markets will resolve a lot. Since Tidewater would be competing against California in the Panamax matters, one would think that the newer markets might be farther from, not closer to the Virginia ports. Namely, this would be places truly at midcontinent. Should that be the case, rail trumps trucks and the McDonnell administration is wrong for springing such as expensive project on cities that don’t want it.

    1. DJRippert Avatar

      “Virginia was the only port on the East Coast with channels deep enough to handle the vessel loaded that heavily.”.

      Key word in that sentence: was.

      I was in the Chesapeake Bay on Saturday doing some investigative reporting. The fact that it was the first day of Maryland rockfish season is coincidental.

      Baltimore is dredged. It will have the necessary additional infrastructure improvements by August of this year. While it is a smaller port than exists in Virginia, it is further north. Therefore, I guess that more of the short haul (truck borne) containers will come through Baltimore headed north.

      Perhaps Virginia’s ports will sound shipments south. Of course, Savannah and Charleston have ports (which will struggle to handle the big ships). However, is it cheaper to send a container via post Panamax ships to Virginia and put them on trucks for Atlanta or ship them on pre Panamax ships to Savannah and truck them to Atlanta?

      Finally, Hydra makes a good point. The existing cargo ships are behemoths. I keep my little 25′ boat well clear of today’s ships. I can’t imagine what these new ships will look like.

  8. Maybe I’m wrong but I’m not convinced ports determine where manufacturing takes place.

    Distribution warehouses, yes.

    but take a manufacturing plant in the Midwest that wants to export.

    Are they going to move away from the place they currently do business and have existing links to steel mills or other interdependent industry or are they going to just find the cheapest way to ship / export and go from there?

    Or would the savings in transportation costs of their product offset the costs of having their component materials shipped to them?

    I guess my point here is that govt really does not understand how business works at the nuts and bolts level and the provisioning of transportation infrastructure in hopes of attracting industry is both speculative and taxpayer subsidized.

    It could be that the Gov and VDOT actually have an industry market study – is that the Chimera study?

    Peter’s question needs an answer also.

  9. ” Thus, to answer Peter’s query, yes, railroads can handle some of the increase in container shipments over the next decade but only a fraction of it. ”

    “For Virginia to reach its full economic potential, the commonwealth needs to increase its highway capacity serving Hampton Roads. Failing to increase that capacity could mean foregoing some economic growth, though how much is hard to say.”

    “That still leaves open the question of whether the U.S. 460 Connector is economically justified: $1.8 billion, including $500 million in public dollars, is an immense sum. ”

    How come rail invests private sector dollars and road invests taxpayer dollars?

    By the way, Stephen Fuller of GMU estimates no less than 55 billion dollars in economic activity that would be gained by extending rail to Dulles.

    I am a skeptic of much of what Fuller espouses…. for instance, he claims that residential development in Washington/NoVa exurban locales is also economically beneficial because they more than pay for themselves in taxes.

    but he does attempt to address the ROI argument for a transportation project.

  10. DJRippert Avatar

    From State Senator Chap Petersen’s blog (Ox Road South):

    “Or we can look at projects like the widening of Rte 460, which is not supported by a single jurisdiction in southeast Virginia yet will cost $500 million. In fact, the City of Portsmouth told us recently they don’t want “this very costly capital project.”

    Is this true, Jim?

    Is this another project dreamed up by the “Richmond elite” to get their money grubbing hands on the extra cash that will be coming through the port? Another “lifetime enrichment program” for the so-called First Families of Virginia?

  11. DJRippert Avatar

    “Railroads are most competitive for cargo being shipped 500 miles or more.”.

    This could be a very reasonable statement or a very dangerous statement.

    It could be dangerous if the reason that short distances are economical for trucks is the lack of rail facilities in smaller cities and towns. For example, a container bound for Easton, Maryland from the Port of Baltimore might be cheaper by truck because rail can’t really get the container that close to Easton (in this hypothetical example). So, why ship by rail to Dover, DE only to transfer to truck and drive the container to Easton? It might be cheaper to use trucks and avoid the rail (and related transfer).

    Why is this important?

    Because the theory would only hold for 500 miles distances (or less) that lack major rail facilities. For example, a shipment bound for Richmond from Tidewater might be better transported by rail if there is good technology for the rail on both ends.

    Tidewater is a relatively small MSA. Very little of the cargo will be destined for local use. This is unlike LA, for example. If the 500 mile “rule of thumb” is more about local transport it may not apply consistently in Tidewater.

    In addition, new transfer infrastructure may change this cost curve. The Ports of Los Angles and Long Beach herald their “technology” and ability to unload (at scale) onto rail sidings directly from ships. If the 500 mile “rule of thumb” is based on average technology and infrastructure then it may not apply to the new kit being deployed at the East Coast ports.

  12. “Or we can look at projects like the widening of Rte 460, which is not supported by a single jurisdiction in southeast Virginia yet will cost $500 million. In fact, the City of Portsmouth told us recently they don’t want ‘this very costly capital project.’”
    Similarly, the boards of supervisors for Loudoun, Clarke and Fauquier Counties have opposed the link in the so-called “Outer Beltway” corridor of significance. Is this another project dreamed up by the “Broad Run elite” to get his money grubbing hands on the extra cash that will be coming through the development of his land? Another “lifetime enrichment program” for the so-called First Developer of Northern Virginia?
    In view of the opposition from local government and the lack of major public benefits, both projects ought to be defunded.

    1. DJRippert Avatar

      Debating the “outer beltway” is one of the more constructive efforts on this site. At least it’s not a project that as been studied forever and is already underway.

      One thing I’d guess – that outer beltway would draw enough traffic away from the original beltway to torpedo the $1/mi HOT lanes. That, in an of itself, would be a good thing.

  13. Yes, it’s true, U.S. 460 is not the highest priority project for the governments of Hampton Roads. Hampton Roadsters would rather expand capacity of the Hampton Roads Bridge Tunnel or build the Third Crossing (Patriot’s Crossing).

    As for who’s dreaming up U.S. 460…. I don’t think the “Richmond elite” is a terribly helpful descriptor. By the “Richmond elite” do you mean the business and civic elite of the Richmond region? Then the answer would be no. There is no one in the region north of Petersburg agitating for this project (or even aware of it).

    If by the “Richmond elite” you are referring to the Virginia political class, then again the answer is no.

    As for the “first families of Virginia”…. Really, are you serious? Are you suggesting that certain old, land-owning families will benefit from the construction of the highway? I don’t think so. The industrial parks that expect to benefit from the recruiting of new manufacturers are all owned by municipal industrial development authorities. Apparently, there is interest among private industrial developers, but they’re all from outside the region.

    U.S. 460 appears to be an outgrowth of conversations between the Port of Virginia, economic developers and the McDonnell administration. They saw an economic opportunity and they developed a new justifiction for an old project that had been languishing on the drawing boards. That’s my sense, although I haven’t thoroughly investigated the matter.

    1. DJRippert Avatar

      So, when a project is proposed in Northern Virginia that seems to have limited popular backing it is always the work of invisible, treacherous, “Tyson’s land owners”. But when a project like Rt 460 is proposed with limited popular backing it is just a conversation between the governor and “economic developers” (whatever that term means).

      I can’t tell if you are naive or in denial.

      1. Nobody said anything about “treacherous” Tysons landowners. But it’s a demonstrable fact that Tysons landowners did gain billions of dollars of economic value from the presence of Metro stations and higher densities and a demonstrable fact that big Tysons worked the political system in support of Metro. So far I haven’t identified any comparable group in the U.S. 460 corridor between Suffolk and Petersburg.

        You can posit the existence of such a group but unless you can surface some facts, it’s all rhetoric. If you can identify some relevant facts, let me know. If there’s a self-serving cabal pushing the U.S. 460 project, I’d love to run it to the ground and add another notch to my journalist belt

        1. DJRippert Avatar

          These same landowners are also paying huge tax bills for the economic zones around the Metro stations. No? Even if the landowner sold the land the added taxes brought the value down. All of this seems quite public. Yet, there is continual screeching about how these secretive landowners are always swindling money through transportation projects.

          As for nobody working the U.S. 460 matter – that seems odd since the localities don’t want it, the tolls won’t support it and it costs $500M.

          Demonstrably, somebody will build the roads and warehouses and they will profit from any decision to expand 460. Others will ship freight over roads paid for with taxpayer funds and they will benefit from the decision to expand 460.

          You have no factual basis for suspecting that the “Tyson’s landowners” have done anything wrong. You don’t even know whether they will win or lose on the Metro. So, if the litmus test is that anybody who might benefit from a public works project is suspect then I suspect wealthy truckers and road construction companies of being behind the RT 460 program.

          1. I never said the Tysons landowners did anything “wrong.” Except for Gerry Connolly’s possible conflict of interest as an SAIC executive, I’ve never suggested that anything they did was illegal or even unethical. They just did what they did. They lobbied, they donated money. That’s how it works in Virginia — a state that, in any other context, you charge with incompetence and corruption.

      2. DJRippert Avatar

        You don’t think Richmond’s Estes family might benefit from a new highway used to truck containers from the port to where ever?

        Funny how developers like Til Hazel are immediately suspect in every NoVa construction project but Richmond based trucking and shipping magnates are not even “aware of the project”.


        1. The Estes family? I’m surprised you’ve heard of them. Estes Express has donated some $20,000 to Bob McDonnell, Bill Bolling, Sen. Steve Martin, R-Chesterfield, and the Virginia Trucking Association since 2009, according to VPAP. I’ve never heard of them being particularly active in the lobbying arena, but I’ll start sniffing around.

          1. DJRippert Avatar

            And Til Hazel donated $8,343 in 2011 – almost all to Republican causes and candidates.

            Of course, since 2000, the Republican Party of Virginia donated $17,691,166 to various state government candidates while the Democratic Party – Virginia donated $16,551,093.

            As for where they got that money …. good luck figuring that one out.

  14. “Railroads are most competitive for cargo being shipped 500 miles or more.”

    Precisesly why short haul commuter rail is so expensive.

  15. Outer Beltway – Until and unless Maryland agrees to a bridge and limited access highway connecting with I-270 and other limited access roads, there can be no effective bypass of the Beltway. From what I have observed, Maryland will not permit any limited access highway or bridge that would cross the Potomac from Virginia and cross upper Montgomery County. That suggests a crossing in Frederick County. I don’t know whether that is feasible. If it is not, then why build a road that will not serve to move traffic between states?
    I’m still trying to figure out what the standard is for approving transportation projects in Virginia. Is local government approval necessary? Can local government veto a project? The standard should be the same for 460, the Outer Beltway and the Silver Line expansion into Loudoun County.
    It’s not a matter of whether Til Hazel is suspect vis a vis the Outer Beltway. He is the guy. Fairfax County elected officials and the landowners on the Tysons Partnership board have said as much.
    It strikes me that, if the 460 upgrade is so important to the Port and the businesses operating there, why don’t they form a PPP and build a toll road? If the Outer Beltway is so important to Mr. Hazel and other landowners, why don’t they form a PPP and build a toll road? If expanding the Silver Line to Loudoun County is so important to the landowners, why don’t they form a PPP to construct rail from the Fairfax Count line westward?

    1. TMT, the 460 upgrade *is* a public-private partnership deal that would charge tolls. The problem is that the tolls don’t come close to covering all the costs. Hence, the supposed need for $500 million in state subsidies.

      Otherwise, I agree with your logic. If the economic value is there, there should be a way to capture that value to finance the construction of the project without dunning taxpayers — whether it’s U.S. 460, the Outer Beltway, Rail-to-Dulles or any other transportation project.

  16. re: outer beltway.

    DJ.. wouldn’t that be classic sprawl?

    but assuming there will be tolls on 495 and none on an outer beltway is ignoring reality.

    The real question is.. what is you built an Outer Beltway with a hefty toll ?

    who would use it?

    1. DJRippert Avatar

      I don’t quite understand the value of an outer beltway. It wouldn’t be classic sprawl although it might be a new form of sprawl. Classic sprawl radiates out from an employment center. This outer beltway would pretty much connect outer suburbs to outer suburbs. I wonder how much value there would be from living near the outer beltway.

      The way to avoid sprawl is to avoid exits. Once you are on the outer beltway, you stay on it until you are past the Washington area. So, if you are driving North – South – great. Otherwise, you’ll have to drive a long way out of your way and then backtrack over surface streets.

  17. “The way to avoid sprawl is to avoid exits.” Amen. I bet those who want the Outer Beltway want a goodly number of exits too. But then, I believe the goal of the Outer Beltway has nothing to do with bypassing traffic congestion on the Beltway.

  18. Peter Galuszka Avatar
    Peter Galuszka

    Interesting leader in the latest Economist magazine about the so-called “Third Industrial Revolution.” It will be driven by a highly digitized manufacturing world. In it, cheap labor costs, such as China’s, will become less importance as assembly lines can used digital information to customized products far faster and much more efficiently. As a result, more large companies are stopping scouring the world for cheap labor and plan on building plants closer to home and their markets.
    In this is the new world, then the US 460 project looks even more lame. If true, then we won’t be importing tons of junk from Asia anymore. If anything, we might be EXPORTING higher end products. But if the key is being close to markets, then why waste so much money on 460, whose raison d’etre is solely foreign trade?

  19. re: the 500 mile tipping point.

    I think this number changes depending on time and circumstance and I bet it’s affected by how much the toll is on competing roads.

    part of the rail thing is wishful thinking though as pointed out previously that the infrastructure for trains has changed dramatically.

    No matter what town or what level of rail access even if CSX runs right through it – if there is a Home Depot or WalMart or McDonalds or Subway – the goods arrive via 18-wheeler.

    what the trains do is take dozens of containers that have a crap load of similar stuff – to the distribution warehouse where it then is slice and diced with other products and loaded on hundreds of 18 wheelers headed for all the Family Dollar stores in it’s region.

    that’s all the more reason for rail infrastructure to be the focus of Panamax container traffic.

    I think the 460 deal is for stuff bound for North Carolina and environs.

    where are the closest ports to stuff bound for NC or Tennessee or Kentucky?

    what ports CURRENTLY serve NC and environs?

  20. While it is a smaller port than exists in Virginia, it is further north. Therefore, I guess that more of the short haul (truck borne) containers will come through Baltimore headed north.


    i think it is more complicated than that. A container of goods sitting on the dock in Singapore won’t wait a week to catch a ship to Baltimore if it can get on one to Norfolk today. There is too much money invested. If the result is they have to truck a litleed farther, it may be better than waitng a week, or even a couple of days.

  21. Peter Galuszka Avatar
    Peter Galuszka

    NC has two ports. Wilmington, which is fairly small but is a big embarkation port for the Army and Morehead City, which is tiny and is a major embarkation port for the Marines. When I was a little kid, I used to watch my Dad ship out to go shoot up Vieques or Labrador.

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