From the February 2022 issue of Pacific Ports Magazine
By Phil Davies, Principal, Davies Transportation Consulting Inc.; Hanh Le-Griffin Director, Ports & Marine Terminals, Hatch Engineering; and Darryl Anderson, Managing Director, Wave Point Consulting
Playing an integral role in economies around the world, ports not only facilitate the movement of imports and exports critical for a nation’s GDP, but they also act as a significant source of family-wage jobs throughout each country. In a previous issue of Pacific Ports Magazine, the authors of this article observed that shifting economic conditions, customer expectations, the emergence of new technologies, and ever-tightening environmental regulations are constant pressures facing ports and their customers. Moreover, confronting logistics and intermodal transportation challenges continue to factor greatly in port and regional trade competitiveness.
The Northwest Seaport Alliance (Seattle/Tacoma) and the California ports of Oakland, Los Angeles, and Long Beach recently commissioned a study to assess and understand the differences between Canadian and U.S. port infrastructure funding and governance policies. In addition to the study commissioners, additional significant regional ports in each country were assessed – namely, the ports of Nanaimo and Port Alberni in British Columbia; Bellingham, Everett, and Vancouver in Washington State; and San Francisco, Stockton, Hueneme, and San Diego in California.
Understanding federal funding of port infrastructure is vital for at least two reasons. First, U.S. Pacific coast ports compete directly with ports in Western Canada for container cargo volumes in the Transpacific trade. While U.S. Pacific Coast Ports are committed to maintaining thriving gateways for global trade, nevertheless, Canadian West Coast Ports’ share of intermodal traffic to the U.S. Midwest has increased from two percent to 22 percent since 2007. Second, the goal of the study is to identify port administrative policies and funding initiatives that may be required to ensure that the needs of exporters, importers and consumers across the continent are well served in the days and years ahead.
As the Infrastructure Investment and Jobs Act and the Build Back Better Act start to take shape, the study’s findings should provide great insight and guidance on funding priorities.
The scope of the study included a review of government funding programs for port and transportation infrastructure related to British Columbia, Washington, and California ports from 2005 to 2021. The review of the relevant Canadian and American transportation infrastructure funding sources included the following eight features:
- Formula Funding Programs
- Formula Funding Eligibility
- Discretionary Funding Programs
- Primary Granting Agency
- Policy Focus
- Discretionary Program Eligibility
- Infrastructure Eligibility
- Contribution Limits
Based on the selected ports and transportation infrastructure funding features, the study revealed that investment in high-capacity, high-efficiency infrastructure has been a national priority in Canada. From 2016-2020, B.C. ports received US$372 million in Direct Port project funding compared with US$45 million for Washington State ports, and US$179 million for California ports. “Direct Port” projects are projects for which a port is the lead agency and/or the infrastructure funded is either on or directly adjacent to port property. Infrastructure funding differentials, to the extent that they impact the efficiency of goods movement, contribute significantly to the relative competitiveness of a particular port or gateway region.
Canadian ports have received more than double the federal funding levels compared to U.S. West Coast ports. Improving the efficiency of existing infrastructure requires strategic investments that enable ports to handle current volumes and grow capacity. To remain competitive, the U.S. must plan for and prioritize investment in ports.
Major ports and gateways
The major ports included in the analysis vary significantly in size and cargo characteristics. The Port of Vancouver, for example, is the largest single port by tonnage in Canada, with a total of 144 million tonnes in 2019 (115 million tonnes of foreign cargo and 30 million tonnes of domestic cargo). Bulk and breakbulk cargo accounted for over 80 percent of the total. The Ports of Los Angeles and Long Beach combined handled 130 million tonnes, of which 67 percent was containerized cargo.
The dominant traffic at the major Canadian ports of Vancouver and Prince Rupert consists of bulk exports which originate in Western Canada. Exports accounted for 86 percent of total traffic by tonnage for the Port of Vancouver and 80 percent for the Port of Prince Rupert in 2020. Bulk commodities (coal, grain, potash, sulphur, etc.) accounted for 84 percent of export traffic at the Port of Vancouver and 80 percent at the Port of Prince Rupert.
Total tonnage provides a benchmark for the relative size of West Coast ports, and the composition of cargo is significant in comparing the significance of port funding. For example, projects funded by the Canadian federal government at the Port of Vancouver may improve efficiency for all types of cargo, while projects funded by the U.S. federal government are more likely to benefit the container sector.
For “Direct Port” projects over the entire 15-year period, Canadian contributions to B.C. ports totaled US$560 million compared to US$92 million for Washington State projects and US$1.6 billion for California projects. The largest California port project undertaken over the last 15 years was the replacement of the Gerald Desmond Bridge. The total project cost was US$1.56 billion, and funding sources included US$726.6 million from various federal programs and a Transportation Infrastructure Finance and Innovation Act (TIFIA) Loan of US$500 million to the Port of Long Beach. If this project is excluded, contributions to California Direct Port projects totaled only US$279 million from 2005 to 2020.
Beyond port-specific projects, U.S. road and rail infrastructure that supports the efficient movement of goods throughout the supply chain are also receiving significantly fewer federal dollars than B.C. investments. The study reports that from 2005-2020 federal contributions to port-related projects total US$1.332 billion in B.C. compared to US$457 million for Washington projects. “Port-Related” projects include “Direct Port” projects (projects for which a Port is the lead agency and/or the infrastructure funded is either on or directly adjacent to port property); and projects which may improve goods movement systems infrastructure and freight operations efficiency but are not specifically related to port operations. These dollars support critical infrastructure such as road, rail, highway, and bridge improvements that support a trade gateway.
The Northwest Seaport Alliance (NWSA) is committed to sustaining a thriving gateway for U.S. trade in the Pacific Northwest and is making substantial investments to modernize our marine terminals and improve freight mobility through the port. The NWSA is implementing many of the study’s recommendations, including the modernization of Terminal 5 to handle larger container ships, partnering with local governments to advocate for improved landside infrastructure, and investing in zero-emission cargo-handling equipment in the gateway.
“The Northwest Seaport Alliance has worked diligently to remain competitive despite inequitable distributions of the Harbor Maintenance Tax and growing competition from B.C. ports. The Canadian government has made British Columbia ports a national priority and unfortunately, U.S. West Coast ports have seen market share slowly shift north to Canada,” stated 2021 NWSA Co-Chair and Port of Tacoma Commission President Dick Marzano. “More infrastructure funding from the U.S. federal government means that we can move more cargo and support more family-wage jobs across our region.”
Regionally significant ports
Analysis of federal investments in British Columbia, Washington State and California’s regionally significant ports reveals that, for the period 2005 to 2020, US$44.4 million was granted in B.C., US$61.1 million in Washington State and US$139 million in California.
The largest Canadian contribution was CD$46 million (US$35 million) to the Port of Nanaimo for expansion of the Duke Point Terminal which handles containers for a successful container-on-barge shortsea shipping service initiated by DP World in 2012.
Contributions to Washington’s Port of Vancouver were provided to assist in the decade-long, US$250 million West Vancouver Freight Access program consisting of 21 individual projects to improve freight rail efficiency by facilitating unit train operations to the port.
Contributions to the Port of Everett included US$10 million to rebuild the South Terminal and US$17.8 million in 2020 to facilitate development of a new marine cargo terminal on the site of a former pulp mill.
The largest California contribution was US$53.8 million for the STACKED Intermodal Project (Autos) at the Port of Hueneme in 2020. Other significant California contributions including US$30 million for a shortsea shipping project at the Ports of Stockton, Sacramento, and Oakland in 2009, and a US$21.8 million grant to the City of Antioch and AMPORTS, Inc. for an auto terminal project.
Insights from Canadian port federal infrastructure investment policy
The results suggest that the emphasis of the Canadian port infrastructure funding policy may not be as fully developed as the U.S. system when it comes to regionally significant ports.
Canada’s major Pacific ports have engaged in broad regional education, advocacy, and planning efforts which have impacted both the design of federal funding programs and the allocation of funding to port and port-related projects.
Even though Canadian Port Authorities are agents of the federal Crown, federal policy was not supportive of contributions to fund port infrastructure prior to 2006. A locally led initiative called the Greater Vancouver Gateway Council (GVGC) was instrumental in building government support for port funding. Membership in the GVGC also includes the Provinces of Alberta, Saskatchewan and Manitoba, boards of trade, private sectors firms, universities, and associations such as the Western Transportation Advisory Council.
Education, advocacy, and planning efforts of major Canadian ports have been successful in attracting federal funding. which have impacted both the design of federal funding programs and the allocation of funding to port and port-related projects. In 2014, a new organization, the Gateway Transportation Collaboration Forum (GTCF), was established. The GTCF Steering Committee consists of senior executives from Transport Canada, the BC Ministry of Transportation and Infrastructure, Vancouver Fraser Port Authority (i.e., Port of Vancouver), TransLink, and the Greater Vancouver Gateway Council. The success of the GCTF in attracting significant contributions under the National Trade Corridor Fund (NTCF) since 2017 can be attributed in part to the pro-active planning process led by the Port of Vancouver. With the new NTCF program, the Port of Vancouver has taken a lead role in planning and delivering projects throughout the Lower Mainland.
“The important role seaports play in the nation’s economy has never been more visible than it is today, during the global pandemic,” said Port of Long Beach Executive Director Mario Cordero. “The ports of Long Beach and Los Angeles, known as the San Pedro Bay port complex, handle 40 percent of the nation’s container cargo imports. The West Coast is the gateway to Asia and the country’s most prominent trade partners. A more equitable distribution of federal funding would make all our operations faster and more efficient, with tremendous benefits up and down the supply chain.”
Key takeaways from the study include:
Major ports in British Columbia have successfully competed against Washington and California ports for container traffic.
Canada has treated the robustness of West Coast ports as a national priority.
Canadian federal contributions to B.C. port projects have substantially exceeded U.S. grants to Washington and California ports over the past five years.
Beyond funding levels, the study identified recommendations to increase U.S. West Coast port competitiveness, including prioritizing investments to accommodate larger container vessels; upgrading landside infrastructure such as roads, rails, and bridges; and investing to improve the environmental sustainability of port operations.
“The Northwest Seaport Alliance is making strategic investments in infrastructure to increase the efficiency of Seattle and Tacoma ports and remain competitive, but we can’t do it alone,” stated 2021 NWSA Co-CHair and Port of Seattle Commission President Fred Felleman. “Investments in port infrastructure not only benefit our economy but also reduce impacts on our neighboring port communities and the environment. The Infrastructure Investment and Jobs Act and the Build Back Better Act fully recognize these benefits.”