Keystone Kops’ Waterfront Precinct

By Jock O’Connell

In the category of unintended consequences, here’s a couple of examples that should (but likely won’t) give pause to political leaders bent on imposing aggressive environmental mandates on California’s maritime gateways.

For those who relish irony, it turns out that cleaning up Southern California’s air by saddling the region’s ports with a costly zero-emission compliance scheme is more apt to add rather than subtract from the volume of toxic emissions discharged into the heavens above.

Our first example involves the nation’s busiest maritime complex, the neighboring Ports of Los Angeles and Long Beach, which jointly unveiled their proposed 2017 Clean Air Action Plan (CAAP) in July. To briefly summarize, the CAAP aims to replace diesel-powered equipment with zero emission gear by 2030, despite some concern that the objective may be both technologically and financially dubious. As this commentary noted with abundant skepticism last month, the two ports appear to have embraced the politically convenient fiction that, without massive injections of public capital, highly desirable clear-air goals can be achieved without untoward consequences — like seeing businesses take their business elsewhere.

The reason: In the absence of substantial financial underwriting from state and federal treasuries, the expense of achieving zero or near-zero emission goals will have to be passed on to the ports’ customers, chiefly the beneficial cargo owners (BCOs) who, unfortunately for the ports, enjoy some discretion over where they do much of their business. The two ports, after all, are national gateways, and the lion’s share of the cargo passing through them start or stop their journeys in places other than in Southern California.

Any expectation that Washington would pony up a few billion has grown more faint the more we learn that President Trump’s much-heralded promise of a $1 trillion investment in restoring the nation’s infrastructure would rely principally (80%) on a combination of state/local government financing and private money. As for the state, Sacramento does plan to chip in some new funds, with $140 million in cap-and-trade revenue to be divvied up among the state’s several ports. But whatever trickles down to the San Pedro Bay ports would be constrained by a neo-Luddite legislative stipulation that none of those funds be used to acquire equipment that might displace labor.

Since it increasingly seems that BCOs will have to foot much of the bill for the ports’ compliance with zero-emission mandates, what consequences might follow? One answer comes from a new analysis conducted by Starcrest Consulting Group. Commissioned by the Pacific Merchant Shipping Association, the analysis demonstrates that efforts to reduce greenhouse gas (GHG) and other emissions from maritime and other logistics operations along the supply chain in California will increase operational costs for cargo owners. And those added costs may have the unintended consequence of shifting cargo flows to less expensive gateways with longer transit times, which would generate higher GHG emission levels.

The Ports of Los Angeles and Long Beach are already the cleanest, greenest ports in the country. They are also some of the most expensive gateways through which the nation’s maritime trade is conducted. Regulatory barriers intended to further reduce GHG emissions in Southern California’s air shed are likely to make use of the ports even more expensive. That raises the prospect that shippers seeking to cut supply-chain costs would opt to exploit the broader Panama Canal to move their cargos through ports on the East and Gulf Coasts.

Doing so may be beneficial to beneficial cargo owners. But lower volumes of trade would hardly be good for the San Pedro Bay ports. And what about a planet yearning for cleaner air? Not so good.

That’s because diverted cargo would be at sea for several days longer. The Starcrest study calculates that GHG emissions from steamships serving the U.S. transpacific trade may average up to 22% higher for cargo bypassing the Southern California ports. (California environmental advocates might also note that the East and Gulf Coast ports most likely to receive diverted cargos are in states much less scrupulous than California about the environment. Indeed, it is the official policy of some of those states to deny any connection between human activity and climate change.)

And there’s more.

The Port of Hueneme in California’s Ventura County has just received a study by Martin Associates that examines how implementation of the state’s At-Berth Regulations might force discontinuation of the port’s thriving automobile import and export trade. The At-Berth Regulation provides that vessel fleet operators visiting the port adopt either of two options to reduce emissions from auxiliary engines: 1) turn the engines off and connect the vessel to an external power source, most likely grid-based shore power; or 2) use alternative control technology that achieves equivalent emission reductions. Neither option comes cheap.

Martin Associates developed a detailed economic analysis of the Port of Hueneme cargo operations. The report specifically quantified the jobs, income, business revenue, and taxes to the local and state economies that would be lost if the port’s automobile trade were forced to relocate to the Port of Portland, Oregon, and/or the Port of Vancouver, Washington, where significant capacity exists for handling auto imports and exports.

Direct job losses at Hueneme were pegged at 1,119, while $58.8 million would be lost locally in direct wages and benefits. $16.3 million in state taxes and $8.7 million in county and local taxes would be paid elsewhere.

Importantly, the study also calculated the “mileage penalty” (i.e., the additional miles involved in hauling cars from the Pacific Northwest ports to auto markets currently served by the Port of Hueneme). In FY 2016, Hueneme handled 338,061 autos, of which 300,061 were imported. Of the latter, 165,831 (55%) were destined for the Los Angeles area, while another 26,852 went to Phoenix and another 14,333 to Las Vegas.

The report concluded that the relocation of the auto operations to the Pacific Northwest could result in a mileage penalty of 14,125,214 ton-miles, which would give rise to $19.3 million of new emissions, based on metrics used by the U.S. Department of Transportation and Environmental Protection Agency to assign a dollar-value to diesel emissions.

Adopting stricter at-berth emissions controls at the Port of Hueneme may be all very well and good for those Port Hueneme residents whose livelihoods are not linked to the port. Those holding those 1,119 local jobs that would be made redundant might have a differing opinion. In any event, it’s worth again raising the issue of whether measures intended to improve air quality at one location — whether it be Port Hueneme or the San Pedro Bay ports — but which aggravate conditions elsewhere do not tarnish California Governor Jerry Brown’s star-turn as a champion of slashing greenhouse gas emissions globally.

The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.