Bureaucracy and eco-regs worry developers
Huge environmental costs and lengthy bureaucratic processes on the US West Coast are starting to make investors take a second look at the whys and wherefores of building terminals.
And there are already signs that developers and operators will consider only buying into existing facilities rather than building their own.
Says Paul Bingham, economics practice leader at consultant Wilbur Smith Associates: "Although some large foreign port operators such as ICTSI have leased existing terminals recently such as T6 in Portland, they don’t seem to be stepping up to take on new terminal development. Instead they want the public landlord port authorities to take the financial risk of developing terminals before they’ll then bid for a concession.
"I would suggest that some international terminal operating companies already shy away from the US market, partly due to the risk and expense related to port environmental issues."
Long Beach's Chris Lytle - newly appointed executive director - told the American Association of Port Authorities recently that it is essential for developers to make sure of every detail of environmental requirements before signing any lease. He noted that the port’s Middle Harbor will take 10 years and cost the port $1.2bn.
Paul Bingham says of the environmental costs: "Because this is an issue whose impacts are built up over the long-term, not something that is an issue month-to-month, many port-watchers don’t appreciate the growing significance of terminal project environmental impact reporting and permitting costs."
Portland's Sam Ruda told the AAPA seminar that the benefits of the link up with ICTSI are: a growing global player with a desire to be in the US, a deal is not a covered transaction under the rules of committee on foreign investment, sufficient shift in capital risk, stabilisation of port revenue/general fund and, the port is no longer dependent on land sales to fund franchise.
Mr Bingham says the increasing regulatory process "affects the ports more than by the extremely long-time that it takes to obtain regulatory approvals (and court judgments through many levels of appeal) to advance terminal improvements. It is the ever-growing cost of the required process, even if it were to be accelerated in the future. Ultimately, this process increases costs of doing business, reduces competitiveness and contributes to potential cargo diversion.
"The costs and time have consequences for the public and private sectors," says Mr Bingham, "with respect to funding terminal improvements and all associated needed infrastructure and facilities, including those outside the terminal gates. In the current economy, this also means less employment in the near- to medium-term, as projects are stalled and workers wait for work to eventually begin.
"While that is a form of public private partnership bringing private capital to needed infrastructure, it is later in the process and more limited in scope than comparable green field port terminal developments in other countries."
