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May16, 2016

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42 THE JOURNAL OF COMMERCE www.joc.com MAY 16.2016 TOP 25 NORTH AMERICAN PORTS SPECIAL REPORT in effect on truck moves during the peak daytime hours. Containers that leave the terminals by rail aren't subject to the fee, so a business case is being built for a reli- able short-haul rail service to the Inland Empire, Christensen said. John Doherty, CEO of the Alameda Corridor Transportation Authorit y, which provided some of the information being used for the short-haul study, said earlier studies couldn't make a business case for short-haul rail, and concluded a subsidy of about $150 per container would be needed to make the concept work. Since then, increasing port congestion, the PierPass traffic mitigation fee and the growth of warehousing operations in the Inland Empire are changing the econom- ics of a short-haul venture, Doherty said. Importantly, the ports are identifying export opportunities in the Inland Empire to refill the containers that are unloaded at the import distribution facilities with paying cargo. If the short-haul service becomes a reality, it also could attract grain- transload operations to the Inland Empire, further enhancing opportunities for profit- able two-way hauls, the ports believe. The two ports are championing the case for short-haul rail as one of a number of options to improve supply chain effi- ciency, but relieving pressure on the gates at the 13 container terminals is a primary motive. The congestion began to surface in the spring of 2014 with increasing calls by ships capable of carrying 10,000 to 14,000 TEUs. Each vessel call generates at least 5,000 container moves, although 10,000-plus container moves per vessel call are now commonplace. Cargo surges from these mega-ships quickly congest marine terminals, espe- cially if imports remain on the docks for the customary four days of free stor- age time. Containers that move by rail, though, usually leave the terminals in 24 hours or less. Unit trains that are built on dock for primary destinations such as Chicago, Dallas and the Ohio Valley carry as many as 750 containers, although short-haul trains to the Inland Empire will be shorter and likely will carry about 200 containers. Still, each train elimi- nates 200 truck moves from the terminal gates and local freeways. Congestion problems pea ked in late 2014 and early 2015 due to work slowdowns and employer retaliation associated with the coastwide contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association. That was probably the biggest motivator for revisiting short-haul rail. However, with U.S. containerized imports projected to increase by 3 to 5 percent each year over the next few years, and with weekly services utilizing vessels of up to 18,000 TEUs possible in the coming year, long- term planning for short-haul rail is beginning to make sense. Short-haul rail, however, comes with logistical challenges at the on-dock rai- lyards that are now present at all of the container terminals in the port complex. Ted Prince, co-founder and chief operat- ing officer at Tiger Cool Express and a veteran of the shipping and rail indus- tries, said many of the on-dock railyards are too small and don't offer sufficient capacity for building full unit trains. At the same time, with 18,000-TEU ships on the horizon, marine terminals probably need the land that is taken up by on- dock railyards for cargo handling or the terminals will experience even greater congestion, he said. Los Angeles-Long Beach executives say recent harbor changes resulting from their combined investments of more than $1 billion are ushering in larger, more efficient on-dock rail operations. The $137 million railyard at Berth 200 in Los Angeles, for example, supplements the capac- ity of existing on-dock railyards by providing space for railcar storage and longer tracks for building unit trains, said Eric Caris, director, cargo marketing, Port of Los Angeles. Automated transfer of containers from the vessel directly to the railyard is taking place at the renovated TraPac terminal, he said. In addition, container terminals are larger today and build in more space for on-dock rail, such as the 45-acre on-dock railyard at the 400-acre APM terminal in Los Angeles. "Certainly, our significant investment in on-dock is coming to frui- tion," Caris said. Long Beach is spending $1 billion for overall rail improvements, including a railyard expansion at Pier B to provide more tracks for storage and the building of unit trains. Although many on-dock rail- yards when they were first developed were inadequate for today's cargo volumes and mega-ships, continuous improvements over the years have transformed them into "real railyards," Christensen said. Despite these advancements, develop- ing short-haul rail in Southern California will require support from UP and BNSF, which own the tracks and much of the rolling stock and equipment in the region. The railroads could work out an agree- ment with Pacific Harbor Line, which performs switching in the harbor on behalf of the railroads, to pull the trains to the Inland Empire, but that would be a new venture for Pacific Harbor Line in its relationship with UP and BNSF. UP is in early discussions with the various parties about opportunities for on-dock and short-haul rail at the ports, but any project that moves forward must "make sense from a commercial and business perspective," spokesman Justin Jacobs said. BNSF spokeswoman Lena Kent noted that historically there hasn't been a compel- ling business case for a short-haul rail service to the Inland Empire. BNSF instead has con- centrated its efforts on attempting to secure environmental clearance for construction of its proposed near-dock Southern Califor- nia International Gateway five miles from the harbor, which would provide sufficient staging acreage for trains that can't be built on dock. A California court recently found the SCIG environmental impact report to be inadequate, however, so the future of the near-dock facility is uncertain. The short-haul study has yet to deter- mine an exact location in the Inland Empire where the trains would terminate. Several locations are being examined to determine where BCOs throughout the region could best be served, Husing said, and he doesn't think that settling upon a location for the rail terminus will be a significant issue. Greg Steff lre, a trucking company owner with operations in the region, and an attorney who handles motor carrier cases, said the model for short-haul rail "has always been there," and logistically it makes sense for motor carriers as well as BCOs. "I don't think any trucker would oppose it," he said. "It would be a wonderful thing." JOC Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo.

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