AGENDA ITEM #14: CANAL EXPANSION: VIRGINA PORT AUTHORITY

SUBJECT: The Expansion – Third Set of Locks project

BACKGROUND: The expansion of the Panama Canal (Third Set of Locks) is a project proposed by the and will double the capacity of the Panama Canal by 2014 by allowing more and larger ships to transit. This project will create a new lane of traffic along the Canal by constructing two lock complexes – one on the Atlantic side and another on the Pacific side.

According to the attached article published in September 2010 in the Commonwealth Contractor publication:

“In 2014, the Canal expansion will be complete and its new set of locks will open allowing the latest breed of vessels to transit and possibly bypass west coast ports in favor of the east coast. Presently, 35 to 40 percent of the cargo coming into and leaving the Port of Virginia transits the Panama Canal and with Virginia being the only US east coast port with the necessary water depth to accommodate larger vessels, it is likely that number will considerably increase; and while the exact increase with the new locks is unclear today, there is no doubt that the expansion will compliment VPA’s assets and give Virginia the upper hand on the competition.”

A representative from the Virginia Port Authority will brief the HRTPO Board on this item.

Attachment 14

RECOMMENDED ACTION: None required; for informational purposes only.

Hampton Roads Transportation Planning Organization Board Meeting – July 21, 2011 Issue 14 POLITICS AND INFORMATION Norfolk International Terminals’ Suez cranes

By Charles R. de Cuir ThePanama Canal and ThePort of Virginia Intertwined Histories Lead to a Solid Future

Photo provided by VPA

Panama and Virginia maritime paths have been intertwined since the days when setting out to explore for new lands on open waters was commonplace; and for good reason, both regions feel comfortable staking claim to the title of the Gateway to the .

It was early explorers that recognized the potential Panama, a narrow stretch of land between North and South America, had as a plausible trading access between the Caribbean and Pacific; and it was also those explorers that decided Virginia was a good place to set up the first permanent English settlement in the New World. Both Panama and Virginia are gateways in their own right.

Attachment 14 20 Commonwealth Contractor | September 2010 Issue 14 POLITICSIssue AND 1 COVERINFORMATION STORY

A Quick History The first Canal expansion created three new locks; Fast forward several hundred years into the settled Americas and the , Pedro Miguel and Gatun. Each new Panama Canal is vital to east-west trade, reducing a voyage from New chamber was 365.76m long, 42.67m wide and York to San Francisco by some 8,000 miles and roughly 30 days; while 13.72m deep. Virginia is on its way to being the east coast hub for maritime business.

• In the late 1930s with Europe on the brink of its first World By comparison the 2014 edition of the Panama War, the need for the Canal to be wide enough for battleships Canal expansion will have the following capabilities; to easily transit takes front and center and the plan for its first 426.72m long, 54.86m wide and 18.28m deep. expansion takes shape. In early 1937 the Congress sets in motion a plan to expand the Canal and improve its defense capabilities. This first expansion creates three new locks and adds a single parallel lane to the Canal. A Promising Partnership • In the 1950s the Virginia Port Authority (VPA) has been created to manage the Virginia ports; and in 1957, by the efforts of the “Our partnership with VPA is more important than ever. As we Hampton Roads maritime community, the Craney Island Disposal embark on the next phase of the expansion project, data sharing and Area is completed. Today on Craney, VPA together with the U.S. market studies exchange will continue to be essential elements of our Army Corps of Engineers are constructing both a dredged material collaboration,” says Alberto Aleman Zubieta, administrator and CEO placement area and a new state of the art port facility for VPA. of the Autoridad del Canal de Panamá (ACP). • Presently and more specifically on July 6, 2010, VPA signed a 20-year lease with APM Terminals, the most technologically In April 2008 Zubieta and Jerry Bridges, executive director of VPA advanced marine cargo facility in the world, that gives VPA the signed a Memorandum of Understanding (MOU) signifying the part- operational responsibility over the APM facility in Portsmouth. nership between the ACP and VPA. A significant inclusion in the The additional 4,000 linear feet of berth and 3.3 miles of on-site MOU is an opening acknowledgment of the commitment to the future rail link the facility to rail giants, Norfolk Southern and CSX. The of both ACP and VPA. “The Parties hereto believe it is in their mutual operations are highly automated and can currently accommodate interest to establish an alliance of cooperation for information sharing 1.4 million 20-foot equivalent units (TEUs) annually. VPA will aimed at generating new business by promoting the all water route be- manage the terminal through its private operating company, Vir- tween Asia and the North American East Coast of the Port of Virginia ginia International Terminals, Inc. (VIT). via the Panama Canal.”

"In my experience this is the biggest deal of my career and I am “While the expansion of the Canal is vital to world commerce, the very proud to have been part of it," says Joseph A. Dorto, VIT's Virginia Port Authority is also positioning itself for increased demand by general manager and CEO. "I believe this cements a very bright building infrastructure and incorporating the necessary enhancements future for The Port of Virginia and our customers." to accommodate the growth that is to come,” confirms Bridges.

Build It and They Will Come

The Craney Island Dredged Material Management “…between Austria and Italy, there is a section of the Alps called the Area is a 2,500 acre confined dredged material Semmering. It is an impossibly steep, very high part of the mountains. disposal site located close to Norfolk, Virginia. The They built a train track over these Alps to connect Vienna and Venice. area is designed to be a long-term disposal area They built these tracks even before there was a train in existence that could make the trip. They built it because they knew some day, the for material dredged from Hampton Roads channels train would come.” ~Frances Mayes and ports. Prior to World War II, dredged material for the most part was disposed of in open water sites. Currently the world’s shipping companies are gearing up for the future The development of the Craney Island Disposal Area with the next generation of vessels. These new builds will provide greater capacity for manufacturers to move more product and increase was passed by Congress under the River and Har- transit revenue as they pass through the new Panama Canal. bour Act of 1946 in response to the need to have a designated area for dredged material. So if the ships are bigger and the Canal is bigger—what about the ports? Attachment 14 Commonwealth Contractor | September 2010 21 Issue 14 POLITICS AND INFORMATION

Provided by Charles de Cuir

of $13.5 billion of employee compensation and $41.1 billion in total state revenue.

In February the biggest vessel to ever come to The Port of Virginia arrived without incident; this vessel was too big to transit the Panama Canal, so it sailed to Virginia via the Suez Canal. When the new locks open, we will see more and more of this class of vessel but they will reach Virginia via Panama.

In 2014, the Canal expansion will be complete and its new set of locks will open allowing the latest breed of vessels to transit and possibly bypass west coast ports in favor of the east Miraflores locks andmules coast. Presently, 35 to 40 percent of the cargo coming into and leaving the Port of Virginia Thanks to the ever-focused vision of the VPA, Virginia’s Port Advantage transits the Panama Canal and with Virginia the ports of Virginia are technologically and being the only U.S. east coast port with the logistically prepared. Even before the Canal Based on the 2006 Virginia Economic and Fis- necessary water depth to accommodate Expansion Resolution was passed VPA had cal Impacts of Virginia Port Authority Opera- larger vessels, it is likely that number will designed, constructed and delivered Suez- tions report undertaken by the Mason School considerably increase; and while the exact class cranes with the ability to service vessels of Business Compete Center and the College increase with the new locks is unclear today, not yet built, in addition to keeping the ports of William and Mary, issued in January 2008, there is no doubt that the expansion will deep water entrances accessible to these yet- the VPA’s economic engine creates 9 percent compliment VPA’s assets and give Virginia to-be-built-class vessels. of the Commonwealth’s workforce to the tune the upper hand on the competition.

Distribution Facilities in Virginia

Attachment 14 22 Commonwealth Contractor | September 2010 Issue 14 POLITICSIssue AND 1 COVERINFORMATION STORY

Panamax and New are terms used to define the size limits for ships traveling through the Canal. Ships that do not meet the specified Panamax-sizes are referred to as Post Panamax. The size is limited by the width and length of the available lock chambers, by the depth of the water in the canal and by the height of the Bridge of the Americas.

Provided by the ACP Proposed Pacific locks

Characteristics of Virginia ports that set 24 warehousing and distribution centers with Post-Panamax cargo ships being built now. them apart include: total investments topping $600 million and Continuing to stay ahead of the competition, • 50-feet-deep shipping channels making 7,000 jobs. the VPA and Hampton Roads maritime com- them the deepest on the east coast. munity have outlined five priority navigation • no overhead bridge obstructions to im- Vision for the Future projects that focus on maintaining unrestricted pede large vessels, navigation in the Port. These priorities will help • a terminal complex that is within a While Hampton Roads’ main shipping chan- the Port reach its full potential, engage the ACP day’s drive of two-thirds of the nation’s nels are the deepest on the east coast, they still partnership and position the Port to support de- population, may not be deep enough to accommodate the velopment of off-shore energy projects. • no congestion at the terminals, • the most technologically advanced, effi- cient container terminal in the world, • expanding double-stack rail capabilities with the opening of the Heartland Cor- ridor in the fall of 2010, • on-dock rail access to the east’s two Class-I rail carriers: NS and CSX.

Virginia’s Inland Port (VIP) also puts the Commonwealth in front of its competition. The VIP opened in 1989 and its location in Northwestern Virginia, situated near the in- tersection of I-66 and I-81 makes it a signifi- cant asset as trucks carrying cargo out of the Shenandoah, Blue Ridge and Ohio Valleys stop there to transfer loads to rail that are sent to the port on daily trains and vice versa.

Because of VIP’s location and direct service to the Port, companies including Home Depot, Provided by the Corps of Engineers QVC, Target, Sysco Foods and Cost Plus Inc. have located to the area. Today, Warren Proposed Craney Island VPA Port County and its surrounding areas are home to

Attachment 14 Commonwealth Contractor | September 2010 23 Issue 14 POLITICS AND INFORMATION

The “Big 5” include: fully authorized widths and depths al- The VPA and ACP are also leading the pack • maintaining the Norfolk Harbor Channel lowing for bigger ships, regarding sustainability issues. ACP has put and Craney Island in a timely manner, • widening offshore lane approaches on together The Panama Canal Green Initiatives • expanding Craney Island eastward in- the South Atlantic Ocean Channel to a that includes environmental legislation, regu- creasing its capacity and providing space two-lane channel approximately 3,000 lation and management programs, inter-insti- for the VPA to build its fourth marine feet wide with a more efficient buoy tutional coordination, socio-environmental terminal needed to handle cargo volumes configuration, activities and The Green Route Concept; a projected to rapidly increase in coming • constructing the 55-foot depth project to strategy designed to meet head-on environ- years, fully authorized widths and depths. mental challenges associated with the Canal • constructingPrefInsAd_plan.pdf the Elizabeth 11/12/09River South- 1:52:45 PM expansion; specifically the Panama Canal ern Branch 40 and 45 foot projects to Watershed and the reduction of emissions in the worldwide shipping industry.

Likewise, the VPA voluntarily implemented an emissions reduction program in 1999 WE START WITH A PLAN, TOO. that focuses on the lowest emission engines available from suppliers and cargo handling OUR CUSTOM THREE-STEP PROGRAM CAN LOWER YOUR NET COST. equipment. Despite the 55 percent increase in cargo volume, the program reduced air Managing your Workers’ Compensation claims is our passion. emissions from cargo handling activities by 30 percent during its first five years. The expectations for 2005 through 2015 are for emissions to decline an additional 38 percent, even with the projected 49 percent increase in cargo volume. In addition, VPA uses ultra- low sulfur diesel fuel throughout the port fa- cilities resulting in further particulate matter C emission reduction.

M Also, in 2007 VPA launched the Green Oper- Y ator program in partnership with the U.S. En- CM vironmental Protection Agency encouraging

MY the voluntary purchase of new or retrofitted low emission trucks by local truckers. This is CY the first voluntary diesel retrofit program at a CMY U.S. Port.

K Conclusion

While the effect of the expansion on Virginia and the VPA is difficult to peg, the fact of the matter is that both ACP and VPA have posi- tioned themselves to charge into the future economically, technologically, environmen- tally, politically, and operationally as true visionary entities. The expansion coupled 703-359-5910 with the foresight by the VPA in preparing www.preferins.com Virginia’s ports to accommodate the future Workers’ Compensation, Commercial Automobile, Property, of maritime transportation gives Virginia the General Liability, Umbrella, Group Benefits and Bonding. competitive advantage. Risk managers for more than 250 contractors. Charles R. de Cuir is the maritime director with Rutherfoord MMA. Attachment 14 24 Commonwealth Contractor | September 2010