US 'Not Ready' for Traffic From Bigger Panama Canal

US 'Not Ready' for Traffic From Bigger Panama Canal

WASHINGTON, D.C. — The debate over U.S. infrastructure funding surfaced at a Senate hearing on the expansion of the Panama Canal today, with speakers noting the broad impact the bigger canal would have on U.S. ports, shipping lines, railroads and truckers.

The $5.25 billion widening and deepening of the canal will affect places thousands of miles from a coastline, such as South Dakota, said Sen. John Thune, R-S.D., ranking Republican on the Senate Commerce, Science and Transportation Committee.

While East Coast ports are working “diligently” to prepare for the larger ships and higher container volumes they expect when the canal finishes its expansion in 2015, “there is a world beyond our ports,” said Sen. John D. Rockefeller, D-W. Va.

“Businesses need to move goods throughout the country,” and the U.S. is not ready for the potential surge of goods moving through ports onto highways and railways, said the chair of the Senate Commerce, Science and Transportation Committee.

“We’ve grown accustomed to an ad hoc approach to our infrastructure with which many seem content, but I am not,” Rockefeller said. “Duct tape and good will do not suffice” as the U.S. lurches “from one inadequate funding bill to the next,” he said.

Except for some discussion of an infrastructure bank and indexing the federal fuels tax, there was little talk at the hearing of a solution to the long-standing impasse over transportation spending. But everyone agreed there is a problem.

“There’s going to be more freight to move, and that’s why we need you to fix the highway system,” said Phillip Byrd, president and CEO of Bulldog Hiway Express, a trucking company Byrd said moved the first containers at the Port of Charleston.

“The biggest challenge to accommodating increased freight volumes” from ships using the expanded canal to reach the U.S. East Coast, Byrd said, “is the connection to roads and rail networks. Those have suffered a lack of federal funding.”

Although no one at the hearing directly questioned whether there would be a dramatic surge in freight volume to the East Coast through the expanded canal, shipping line executives have said the route is too expensive for Asian freight.

“It’s impossible to be profitable on service from Asia to the East Coast via the Panama Canal,” Maersk CEO Soren Skou said at The Journal of Commerce’s TPM Conference in March, especially since the canal imposed higher tolls.

Maersk is taking an alternate route highlighted in the testimony of port consultant John Vickerman — Southeast Asia to the U.S. via the Suez Canal and the Mediterranean.

“We have to take a global, systemic competitive view of what’s going on,” he said. “If we have larger vessels coming to us from Suez, we’ll need significant improvement to our ports and still need to accommodate vessels from the Panama Canal.”

That kind of work requires years and even decades of planning, said Jeff Keever, deputy executive director of the Virginia Port Authority, but shifts in global shipping patterns are already well under way, from Hong Kong to Hampton Roads.

“Perhaps it is time to consider doing more (to aid ports) on a federal level,” Keever said. “We need a robust national infrastructure program supported by a clear national policy, an accelerated process and dedicated funding stream.”

Global trends already are reaching U.S. railroads, with intermodal traffic increasing throughout the U.S. as importers and truckers look for more capacity on the rails, said Ed Hamberger, president and CEO of the Association of American Railroads.

“In 2013, the trucking industry will become our number one customer base, as intermodal will exceed coal,” Hamberger said. “Our single largest customer is UPS,” he said. “What Brown does for you every day, we do for Brown every day.”

But to do that work, railroads will need to keep up their own investment and be able to tap into a larger pipeline. Transport operators and shippers are running up against an “infrastructure situation which is wholly inadequate,” Rockefeller said.

“You need every single source of revenue you can possibly get to take on the gargantuan task,” said the senator, a key player in a battle to shape the next transportation bill that is already under way in the House and Senate.

In February, Rockefeller and Frank R. Lautenberg, D-N.J., introduced legislation that would create a $5 billion federal fund to provide incentives for private, state and regional investment in transportation projects, including rail and port projects.

“We constantly fail to rise to the challenge and we’ve got find a way to rise to the challenge, out of sheer fear for our economic future,” Rockefeller said.

Contact William B. Cassidy at wcassidy@joc.com and follow him at twitter.com/wbcassidy_joc.