Does California Care?
By Thomas Jelenić, Vice President, Pacific Merchant Shipping Association
As an organization that represents ocean carriers and marine terminal operators, we at PMSA spend an inordinate amount of time thinking about trucks. Yet, as intermodal hubs, ports are dependent on a functioning, competitive trucking system to move goods to and from marine terminals. California is in the midst of developing a regulatory framework to drive carbon emissions in California to zero. For port drayage, the result may not be just environmental transformation, but a complete remaking of a sector that the maritime industry (and, frankly, every American) depends upon. The concern is that the effort may wreck the drayage business in the process.
This newsletter has commented on the upcoming regulatory hurdles the maritime industry faces. Nonetheless, it is important that a closer look be taken at not just the goals of upcoming regulatory efforts, but the means of accomplishing those goals. Before we get into that, there is one thing that is important to understand. While trucks serving California ports are called drayage trucks, drayage trucks are not a type of truck. Instead, drayage refers to the service that is provided. Drayage trucks are interchangeable with any Class 8 heavy-duty truck in California. That is a critical distinction because as cargo volumes change due to Christmas shopping seasons, tariffs, or pandemics, California ports can draw from the larger pool of California trucks – that is one reason the number of “infrequent” trucks serving ports is so large. The California Air Resources Board (CARB) is proposing to put an end to that interchangeability.
The proposed Advanced Clean Fleets (ACF) rule would radically eliminate interchangeability by creating a legacy drayage fleet on January 1, 2024. Any trucks not part of the legacy fleet must be zero emissions (ZE) after this date. As a result, any changes in cargo flows could only be met by ZE trucks; something that will be extraordinarily challenging in the first years of implementation due to factors including current technological and economic feasibility of ZE trucks and the complete lack of necessary fueling infrastructure.
One of the concerns about CARB’s analysis of how the rule will work is that it did not take into account “churn”. The trucks that serve California ports change for numerous reasons: new customers, loss of customers, new opportunities in other trucking sectors, new trucking businesses, or going out of business. Churn is important because the proposed ACF will require ongoing service to the ports; trucks that do not serve the port in a given year will lose future access, shrinking the legacy fleet. When the port drayage fleet is indistinguishable from the larger California fleet, this dynamic is invisible. But with a fixed and shrinking legacy fleet, churn will accelerate the shrinking of that fleet.
PMSA requested data from the ports of Long Beach and Los Angeles’ Port Drayage Truck Registry between 2013 and 2021. For each year, the number of trucks that lost permission to serve the ports and the number of trucks that gained new access to the ports was pulled from the data. The results are significant. Over the study period, 15%, on average, of all drayage trucks lost access to the ports in any given year. In addition, the trucks that obtained access to the ports represented 17% of the population. The difference represents the growth over time of drayage capacity.
Based on the current population of approximately 21,000 trucks providing drayage service to the ports of Long Beach and Los Angeles, the legacy fleet would shrink by over 3,000 trucks in 2024, the first year of implementation of ACF. Based on the historical average of new truck entrants to the San Pedro Bay drayage pool, over 4,500 ZE trucks would need to be added in the first year of implementation. That is a significant number of new ZE trucks in a market that relies overwhelmingly on trucks procured in the secondary used truck market.
More concerning than the volume of ZE trucks is the lack of infrastructure. That number of trucks would require approximately 380 charging stations to be installed every month in the first year of implementation or 31 charging stations every single day. Given that independent owner/operators (IOOs) serve California ports, the charging infrastructure described above will need to be public charging facilities. These IOOs are not part of large truck fleets and will need to rely on public-facing charging infrastructure. As a result, IOOs will not be the ones that initiate infrastructure development. Infrastructure must come early either from public agencies or the private sector. With less than 18 months to the proposed implementation date, the level of investment necessary to support the foreseeable market churn of port drayage does not exist.
Depending on the details of the final rule, ACF will transition these truckers either into clean trucks or transition them out of business. It is worth remembering that the ports of Long Beach and Los Angeles’ original Clean Trucks Program pushed thousands of IOOs out of business due to its requirements, often due to the fact that IOOs could not financially qualify to purchase a new truck. “Luckily”, this was coincident with the Great Recession, which pushed down cargo volumes and did not unduly constrict trucking capacity.
The rapid decline of the legacy fleet in early years coupled with the number of ZE truck deployments and needed infrastructure foreshadows a significant capacity crunch that will result in disruptions to California’s and the nation’s supply chain in the early years of ACF implementation. Ultimately, if California cares about its supply chain and the people who work in it, the ACF must consider the population it is regulating and how that will impact the ability to move cargo throughout the supply chain. If California cares.