As soon as he heard about President Obama’s proposed budget for fiscal 2014, Curtis Foltz flew to Washington to meet with Georgia’s congressional delegation. As executive director of the Georgia Ports Authority, Foltz needed their help in getting congressional funding for the long-delayed Savannah Harbor Expansion Project that he had hoped would be in the budget.
Port infrastructure funding took center stage this month in plans to deepen the harbors of Charleston and Savannah. Charleston got good news, in the form of $1.165 million for the U.S. Army Corps of Engineers to continue the feasibility study for deepening the port’s harbor. Savannah got a little more, $1.28 million in funding for SHEP, as the project to deepen the Savannah harbor to 47 feet from 42 feet is called. But the GPA had been hoping for $100 million and wanted the president to support reauthorization of the ballooning project cost it needs.
“We were disappointed on two fronts, the lack of funding in the budget and the failure to address the (Section) 902 fix,” Foltz said, referring to the need for Congress to reauthorize funding for SHEP. It already had authorized funding of up to $500 million, but mandated environmental protection measures have inflated the project cost to $652 million.
Under Section 902 of the Water Resources Development Act, Congress must reauthorize funding up to that amount before the Army Corps can sign a partnership agreement with the state and the GPA that will enable it to start construction on the project, which is supposed to start this fall. “We were hoping the president wouldn’t wait for Congress to raise that limit and that he would raise it in his budget and offer some significant funding.” Foltz said.
Spending Under the Microscope
Federal sequestration and spending constraints obviously took their toll on the president’s budget plans. Now SHEP will have to await congressional reauthorization before it can get started, but Foltz doesn’t think that’s likely to delay the start of construction by more than a month or two. “We’re not significantly delayed,” he said.
The Army Corps is still working on the original schedule because it expects Congress to reauthorize the project up to the new limit late this summer and plans to start awarding contracts late this year. If that happens, SHEP will stay on its original timetable, with completion in the second half of 2016. That would be about a year after the Panama Canal opens its new locks to commercial traffic, and swings the gates open to ships capable of carrying 13,000 20-foot-equivalent container units of cargo from Asia to East Coast ports.
The GPA, whose ports rank fifth on The Journal of Commerce’s list of Top 25 North American Ports with total 2012 laden cargo volume of 2.3 million TEUs, did get some good news this month when the South Carolina Savannah River Maritime Commission approved a settlement of the lawsuit that it and three environmental groups had filed to block SHEP.
Under the proposed settlement, the GPA will set aside $35.5 million to ensure various environmental mitigation projects are implemented when the Army Corps begins deepening the river. It also will donate 2,000 acres of salt marsh to protect aquatic life on the river. The GPA will provide the funds for the settlement independent of SHEP funding. “It speaks volumes to Georgia’s commitment to get this project moving,” Foltz said.
In addition to the $35.5 million settlement, the environmental mitigation measures included in SHEP will cost 20 to 30 percent of the total project cost, or $150 million to $196 million.
For now, however, SHEP doesn’t have funding under the president’s budget, so the Army Corps will have to borrow the construction money from funds the Georgia Legislature has allocated to pay for its 40 percent share of SHEP. The Legislature chipped in another $50 million under the 2014 budget, bringing the total amount to $231 million, enough to fund the project for about 16 months.
“We are setting the stage for all parties for the fiscal 2015 budget, which will enable the government to repay the state,” Foltz said. He’s confident Congress will reauthorize funding this year and allocate money in fiscal 2015 because of a growing realization among congressional leaders of the need to invest in port infrastructure.
He said Georgia’s congressional delegation is committed to the project, and singled out Bill Shuster, R-Pa., chairman of the House Committee on Transportation and Infrastructure, as a leader in this effort. “The country is falling behind in port infrastructure, and there is a wave across the U.S. that recognizes the need to modernize our ports,” Foltz said.
Charleston Enters the Homestretch
Meanwhile, 90 miles north, the South Carolina Ports Authority, whose ports rank 11th on the JOC Top 25 list with 2012 volume of more than 1.2 million TEUs, is building momentum for its plans to deepen its harbor to 50 feet from 45 feet. By June, the Army Corps will be halfway through the feasibility study it started in 2011 and plans to complete by September 2015. “We will have completed the feasibility study in four years, knock on wood,” said Jim Newsome, president and CEO of the South Carolina Ports Authority.
With the money for the study funded in the Obama budget, the Army Corps will get all the $13 million in funding it needs for the study. The corps is working under new guidelines for deep-draft navigation projects, so the cost of the study, originally projected at $20 million, has been reduced to $13 million or less, which is shared equally by the government and the SCPA.
As envisioned in the project, Charleston’s entrance channel will be deepened to 52 feet, and the main harbor to 50 feet to the Wando Welch terminal and the new terminal being built at the former Navy Base. The channel to the North Charleston terminal will be deepened to 48 feet. With a 50-foot depth, Charleston will be able to handle ships with drafts of 48 feet round-the-clock, instead of just twice a day at high tides as now. Fully loaded 8,000-TEU container ships, expected to be the workhorses of the post-Panamax services that will use the Panama Canal’s new locks, have a draft of 48 feet.
When the feasibility study is completed, the Army Corps will issue a Chief’s Report recommending whether the project should proceed. The Army Corps’ initial 2010 Reconnaissance Study of the Charleston harbor deepening project, at an estimated $300 million, would be the “cheapest South Atlantic harbor to deepen to 50 feet,” so the report is likely to recommend the project. The project’s environmental mitigation measures are estimated at 10 percent of the total project cost, or $30 million.
Following the Chief’s Report, Congress must authorize the project through what is supposed to be a biannual Water Resources Development Act, although it hasn’t passed a WRDA since 2007. Shuster’s House committee is considering a new WRDA, but the draft legislation won’t include authorization for the Charleston project because it won’t have the Chief’s Report recommending the project.
That means any authorization will have to await the next WRDA — in fiscal 2016 at the earliest — or be enabled by new guidelines to consider such capital projects that might be incorporated in the current legislation. “The thinking is, ‘How do we address the current earmark ban and make sure that harbor projects that are meritorious move forward,’ ” Newsome said.
With such a provision in the WRDA enabling Congress to authorize funding outside of the act, Newsome thinks harbor deepening could begin as soon as 2015 and be completed by the end of 2018. “That would mean we started the project with the Reconnaissance Study in 2010 and (would) be done with it in eight years,” he said.
The final step in getting the project started will be congressional appropriation of funds. But given the current budget constraints, Newsome thinks the Army Corps will have to dip into the funds South Carolina already has appropriated for the project. The South Carolina Legislature last year set aside the full $300 million project cost, which the Army Corps can use to start construction once Congress authorizes the project. The state would be responsible for 60 percent of the cost of the project, or $180 million.
Although South Carolina could pay for the whole cost of the project, it plans to wait for congressional authorization, because without that, it would bear a responsibility for the cost of the $14 million the Army Corps now spends on maintaining the harbor’s depth every year. “If you go off on your own,” Newsome said, “you’re sucking up the whole maintenance for the project.”