Unprecedented Uncertainty

By Paul Scott Abbott

U.S. ports, including those moving project and breakbulk cargoes, require billions of dollars of federal funding to overcome Covid-19-related impacts and to ensure sustained operations, but discordant partisan politics appear to be standing in the way on both fronts.

Indeed, the viral pandemic and the economic plummet it has prompted are woven into a troubling tapestry that, if not aflame, is perilously frayed. Tenuous threads also include a nationwide social justice uprising with occasional violence, raging wildfires, a devastating hurricane striking Louisiana and Texas, and a host of actions by President Donald Trump, such as threats to “decouple” the U.S. economy from that of China.

It all adds up to unprecedented uncertainty. And for leadership of key maritime transportation industry bodies, as well as major breakbulk and project cargo ports, the cries are becoming increasingly vocal for much-needed stability which currently stalled legislative measures might bring.

By early September’s Labor Day weekend, with the Nov. 3 presidential election less than two months away, the U.S. still did not have control of its deadliest health crisis since the 1918 Spanish flu pandemic and was struggling to recover from its worst economic collapse since the Great Depression struck in 1929. The U.S. coronavirus death toll passed 200,000, with reported cases surpassing 7 million, while the nation’s economy was barely chipping away at offsetting its record 31.7 percent annualized contraction of the second quarter and an unparalleled loss of 22 million jobs.


Legislation in Limbo

Amid politicking for the November election, key legislation of particular interest to U.S. ports remained in limbo.
Remaining without passage were a second round of pandemic stimulus funding and H.R. 7515, the Maritime Transportation System Emergency Relief Act of 2020, or MTSERA, and the companion S. 4395. H.R. 7515 was promptly adopted as an amendment to H.R. 6395, the William M. “Mac” Thornberry National Defense Authorization Act for Fiscal Year 2021, which passed the House on July 21, moving it to the Senate for consideration. However, Trump has warned of a veto of H.R. 6395 because of a provision boding to remove the names of Confederate Civil War commanders from 10 major military installations – base names Trump wants to keep in place.

Christopher J. Connor, CEO of the American Association of Port Authorities, called MTSERA “hugely significant for the port industry,” noting that it would give Congress a permanent mechanism via the U.S. Department of Transportation’s Maritime Administration to appropriate emergency relief funds for America’s maritime system, including ports, in the event of emergencies and disasters ranging from hurricanes to health pandemics.

U.S. ports, which as of last year had been responsible for US$5.4 trillion in annual economic activity, face an estimated decline of between 20 percent and 30 percent in total annual receipts in 2020, according to Connor.

“Since the onset of the coronavirus crisis, legislators have repeatedly told AAPA that aid to America’s port system was hampered by the lack of a mechanism for distribution,” Connor said. “The MTSERA legislation would resolve that once and for all.”

Lauren Brand, president of the National Association of Waterfront Employers, or NAWE, also has high hopes for MTSERA. She was among those who testified at a May 29 hearing of a House subcommittee out of which MTSERA ultimately emerged.

“We believe this is historic legislation as it is the first to provide assistance to both public and private maritime industry entities for 11 operational cost categories for declared disasters,” Brand told Breakbulk. “Our nation’s ports and terminals have been buffeted by hurricanes, closed by earthquakes, hit by tornadoes, and it will keep happening. Until MTSERA, there has been no federal program that private terminal operators can turn to for assistance in time of disaster.

“The genius of this proposed bill is that it will address future needs as well as this awful pandemic,” she continued. “Our cargo terminal operators have seen cargo declines up to 32 percent and our cruise terminal businesses plummeted to zero. A decline in revenues at the exact time operating costs skyrocket is a difficult business scenario to sustain.”

Brand said operating cost increases include cleaning, sanitizing, personal protective equipment and other safeguards for workers, adjusting terminal operations for recommended social distancing and more. Debt service demands do not stop even if work on a project has been halted, she noted.


‘One-Two Punch’ Needed

That said, Brand defined emergency relief as a short-term solution to an immediate problem requiring streamlined administrative requirements to get funds out the door. Just as vital, she said, is long-term infrastructure funding for port facilities and intermodal connections.

“Running programs one year at a time costs more in the long run, as it focuses on regional versus systemwide impacts and diminishes the efficiency of the government staff charged with running the program under the voluminous federal regulatory process,” said Brand, who served 11 years at MARAD, including as associate administrator for ports and waterways, before taking the helm at NAWE in late 2019.

“This,” she said, “is the one-two punch needed to win the fight to improve the U.S. transportation system overall: Immediate relief for declared disasters to get facilities back up and running strong, then help them invest for the long term to handle our nation’s freight needs for the future.”

Brand said each year for the past 10 years has seen only a tiny share of requests to MARAD for Port Infrastructure Development Program funding gaining approval under the present competitive grants framework. In a typical year, requests may top US$1 billion, but only US$50 million to US$200 million in grants are awarded.

She also cautioned that federal awards, whether part of a stimulus package or via port infrastructure grants, are subject to a long administrative cycle. Stimulus funds might be available within six months of bill passage, while infrastructure grants could take a year.

“If eligible applicants know what to expect, they can work within these parameters,” Brand said. “But one element that often falls victim to grant timetables is the estimated cost of projects. A project’s cost estimate must be based on the most current material costs available and must include an adequate contingency. I have seen where estimates for a project were completed a year before a grant application was submitted, and once the grant funds were ready to be spent, 24 more months had gone by. Cost estimates that were three years old limited the project, requiring re-engineering, reduction of project scope and reduction of equipment purchases to meet the available budget.”


Relief Funding Urged

Back on July 23, AAPA was joined by 69 co-signatories from U.S. ports and related entities on letters to the White House, U.S. Treasury Secretary Steven Mnuchin and House leadership urging inclusion of US$1.5 billion in emergency relief funding for ports in a second round of Covid-related legislation, to follow the initial US$2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, signed into law by Trump on March 27.

The letters also called for an amendment to the CARES Act to give specific authority to state governors to provide such funds to ports. Currently, port requests for CARES Act funds have been very limited, with one such applicant being the Port Authority of New York and New Jersey, which, in addition to seaport facilities, has airports, bridges and tunnels under its aegis. The bistate authority seeks US$3 billion to offset estimated revenue losses.

As of the Labor Day weekend, those cries for federal port funding had gone unheeded, although on Sept. 3, the Thursday preceding the holiday weekend, U.S. Transportation Secretary Elaine L. Chao unveiled the first-ever National Freight Strategic Plan. But the plan did not include any funding specifics.

Support for the “one-two punch” approach backed by AAPA, NAWE and a host of ports is shared by Doug Wheeler, president and CEO of the Florida Ports Council, who said the Covid-related termination of cruises, along with a slowdown in cargo traffic, including in shipments of steel and automobiles, has led to the loss of an estimated 169,000 jobs in Florida and a US$23 billion hit to Florida’s economy.

“The immediate relief is what is needed first and foremost, but the need is two-pronged,” Wheeler told Breakbulk, citing importance of port funding in ongoing appropriations as well. He has written to Senate leaders seeking US$1.5 billion in immediate emergency aid to U.S. seaports plus another US$2 billion to be made available to other eligible maritime businesses.

“Congress must pass legislation to provide the maritime sector the same protections and relief given to other industries during Covid-19, and close a huge gap in current federal emergency assistance that has left links in the maritime supply chain isolated and unable to access other assistance programs available to other industries,” he said.

“I don’t think I’m going to try to guess what Congress is thinking,” Wheeler said. “You’ve got to be really careful about allowing this to stop projects that are needed for the supply chain.”


U.S. Gulf Ports Hit

Among U.S. ports taking a hit due to the pandemic are major breakbulk facilities in the Gulf of Mexico region.
Port Houston reported year-over-year drops in total cargo tonnage of 7 percent in June and 6 percent in July, with declines in handling of steel, automobiles and breakbulk cargo as a whole. But port officials have said they will not be deterred from proceeding with Houston Ship Channel expansion and wharf and yard infrastructure enhancements.

Meanwhile, at the Port of New Orleans, breakbulk volumes through July were down 27 percent from a year ago, according to Jessica Ragusa, the Mississippi River port’s communications manager, who said the drop has been driven primarily by reductions in steel imports and a slowdown in the oil and gas market. On the plus side, wind power components are among goods enjoying increased importation.

“Like other U.S. ports handling breakbulk, the Port of New Orleans’ breakbulk tonnage has been severely impacted by tariffs, Covid and weakened demand associated with Covid, such as a reduction in North American manufacturing in the automobile industry and the current market dynamics in the oil and gas industry,” Ragusa said.

“Despite the downturn in breakbulk cargo, the port continues to invest in maintenance and upgrades to our breakbulk facilities,” she said. “The port invested approximately US$15 million between 2018 and 2019 in breakbulk wharves alone.

“It is critical,” Ragusa said, “for Port NOLA to continue to move forward with vital infrastructure projects to maintain a state of readiness to lead the nation’s economic recovery.”


Storm Adds to Woes

As if maritime and energy-related facilities along the Gulf didn’t already have enough concerns, Hurricane Laura made landfall in Southwest Louisiana on Aug. 26, with winds reaching more than 130 miles an hour and causing extensive flooding.

While ports of New Orleans and Houston, respectively to the east and west of Laura’s path, were minimally impacted, the Port of Lake Charles, Louisiana, was out of commission for a week, and some Southwest Louisiana liquefied natural gas and chemical plants, including Sempra Energy’s Cameron LNG terminal in Hackberry, were looking at extended shutdowns.

In Southeast Texas, the ports of Port Arthur and Beaumont, both of which see substantial breakbulk and project cargo activity, each got power back within a week.

“The pandemic has not had a significant impact on the Port of Beaumont as of yet, but we have seen large industrial projects put a pause on their development efforts in recent months,” said Sadé Chick, the Port of Beaumont’s director of corporate affairs. “We understand this could result in a slowdown in the future, but are optimistic that project and breakbulk cargoes will bounce back as economic recovery efforts continue.”

The Port of Beaumont, which was seeing a 13.5 percent year-over-year increase in cargo volume through August, is planning to proceed with all 19 projects under its recently approved US$248.8 million capital improvement program, with 13 of those undertakings under way, Chick said.

She pointed to advocacy efforts of AAPA and Southeast Texas representatives in U.S. Congress, commenting, “The recovery packages that focus on infrastructure improvements are a win for the maritime industry, but not necessarily a savior. The savior comes in the form of the Port Infrastructure Development Program, which is specific to ports and has made a noticeable impact on every region it has touched. “Billions of dollars are needed to modernize port facilities nationwide to remain competitive, and this program is working toward that goal,” Chick added. “Unfortunately, even though port activity supports 26 percent of the GDP, roadways are typically given priority when it comes to funding, and seaports historically receive only a small fraction of the funds they are eligible for.”

AAPA’s Connor put it this way: “Policymakers must not overlook our nation’s ports in their time of need. The relief we’re seeking isn’t about replacing lost carrier, cargo and cruise passenger revenue. It’s about ensuring that ports are able to keep pace with the accelerating costs of protecting their workers while keeping their workforce employed. It’s about ensuring bond and other debt instrument payments aren’t missed. Ultimately, it’s about maintaining a state of readiness so ports can significantly aid in the nation’s eventual economic recovery.”

A professional journalist for nearly 50 years, U.S.-based Paul Scott Abbott has focused on transportation topics since the late 1980s.

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