Day-By-Day Report2014 Infrastructure Study Tour

Saturday, August 30 – Port Arthur, Texas Jeff Kirwan, Chair of Day

Port of Port Arthur - Orlando Cimarella

The Port of Port Arthur (POPA) is a small port catering to a certain clientele and is specialty-service oriented. Break-bulk and wood pellet storage are very important. The operation has 130 square feet of storage under one roof. Kansas City Southern Railroad serves the facility. Major exports include wood pellets (to the EU to meet energy from renewable fuels requirements), steel and baled paper (imported from Brazil and sent to Europe). In addition, baled paper is sent to Kimberly Clark.

Getting permits (e.g., to extend the port into what is now a small waterway) can be a challenge because the Corps of Engineers has to make a determination on the type of culvert that should be used. Other regulations are also challenging. The POPA would like to expand beyond the two existing facilities in order to handle additional cargo and offer additional services to its clients. One of the existing facilities is a permanent (concrete sides plus a concrete roof). The other building is modular (steel beam siding with a fabric roof (flame retardant) that can be moved.

In the 1990s, of the port’s business, 80% were exports and 20% were imports and now that has flip-flopped. The POPA is owned by the City, city tax dollars can be received, but the POPA needs more funding than the city provides for improvements and for dredging.

Sabine-Neches Waterway - Randy Reese and Paul Beard

The Sabine-Neches Waterway (SNW) is the 4th largest in the nation and is the #1 U.S. crude oil import waterway. The SNW is a state government organization, is a taxing body and can receive tax dollars. The SNW is also the number one bulk liquid port (oil and chemicals), the number one commercial military export port, and is positioned to be the number 1 liquid natural gas (LNG) exporter. This latter fact is due to the waterway’s existing land and facilities that were in place to import LNG in prior days (before the U.S. became a major producer of LNG). Now, those areas have been retrofitted to be able to export LDG and the waterway is well-located in terms of key ports for oil processing and LNG exports.

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Permanent jobs associated with operations include 206,000 in Jefferson County where the District is located and 303,000 in the state of Texas. Waterway operations generate annual gross product of $36 billion for Jefferson County, $57.5 billion for the state of Texas, and $90 billion for the U.S.

Despite its importance, the waterway has not been improved since 1962. With the passage of the Water Resources Reform and Development Act (WRRDA) this year, SNW stands to receive $1.2 billion to improve the navigation channel. Improvements in the waterway will reduce transportation costs for commodities and increase the output of goods and services. Savings will accrue from the ability to use more fully loaded vessels, more efficient use of existing vessels, reductions in transit times, and lower cargo handling and tug assistance costs. Moreover, the improvement project itself will create thousands of jobs and generate billions of dollars in economic impact.

In addition to channel improvements related to ship movement like increasing the channel depth, widening ship turn around basins, tapering banks, and extending the off shore channel, the project will provide significant improvements to area marshes, wildlife areas, and the beach and shoreline. Previous attempts to mitigate salinization of the marsh areas near the mouth of the waterway (use of man-made chevrons designed to slow the sea movement onto land) did not work. Newly proposed methods will use dredged materials to restore degraded marshes. The SNW had to meet with 27 different agencies to get approvals for the proposed placement of sludge on the wetlands.

The SNW’s improvement proposal is very attractive from a cost benefit standpoint; its proposed placement of sludge onto the wetlands plus the cost benefit ratio of the project is why it got approved in the first place. For every mile of wetland regeneration, the area gains 1 foot of additional storm surge handling ability.

The SNW would like help with OMB and the cost benefit ratio. OMB is using outdated information and should update the CBR to show more positive impact. The SNW recently met with Illinois legislators Durbin, Kinzinger, and Hultgren on WRRDA results and implementation.

Sunday, August 31 – Galveston & Houston Texas Jim Malley, Chair of Day

Port of Galveston - Captain John Peterlin

At 200 years old, the Port of Galveston is the oldest port west of New Orleans. First settled by pirate John La Fitte, the port was private until 1940

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when it was sold to the city of Galveston. It is now a public entity A quasi-governmental corporation, the port is a non-taxing entity that also does not receive taxes and pays a fee to the city. This is in contrast to the port of Houston, which is a taxing entity and therefore has a competitive advantage in obtaining public funds. The port of Galveston has a charter and a Board of Directors. The port tries to be an economic engine, but finds it hard to compete for many project dollars with Houston. The port of Galveston does not receive or rely on local tax dollars.

The POG has a $3.1 billion impact on the local economy, creates 13,000 jobs regionally. Each year, $52.6 million worth of state and local tax revenue is generated by cargo and cruise activity and an additional $24.5 million from economic activity of related users of cargo moving through the port. Thirty miles to open sea, the port covers 850 acres of property and has a shipping channel 45 feet in depth. Approximately 6.7 million short tons per year are shipped out of the POG; agricultural shipments include grains, fruits and vegetables, livestock, cotton, etc. BNSF and Union Pacific railroads serve the port and it has immediate access to the interstate highway system and Gulf Intercoastal Waterway. The port also has efficient labor and competitive rates.

The port is a Foreign Trade Zone, which offers advantages to shipping companies and companies in the port. The POG is a USDA certified livestock shipper (breeding cattle) and shipped 30,000 head in 2012 (mostly to Russia). So far, the port has shipped 90,000 animals since receiving its certification. The port is also Texas #1 cruise ship port, the second fastest growing U.S. cruise port in 2012, and is the fourth busiest in the U.S. The cruise industry employs about 20,000 residents, contributing $1.1 billion. About $65 million has been invested since 2000 in order to build opportunities to serve the cruise ship area.

The POG has many connections to Illinois and serves many clients from our area, including Caterpillar, ADM, and Deere. The port also imports many products relevant to Illinois businesses like wind turbines and fertilizer. Mosaic (Cargill) has a sulfur plant on the property. Other fertilizer imports come in through CHS terminal. Captain Peterlin attends the Inland Distribution Conference each year near Peoria.

The POG is working on public private partnerships in order to fund certain projects. The port is also trying to get back into the container business. Short-term, the POG does not have plans to deepen the shipping channel, but the Port of Houston is doing a study on the economic impact of that effort on the Houston area, which should also be helpful downstream.

Planning for Tighter Truck Capacity – Brian Fielkow

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Looking at the trucking industry today, nearly 7 million people are employed in trucking related industries. A majority of trucking companies are small businesses with about 90% of them operating six or fewer trucks. Only about 2.8% of fleets operate more than 20 trucks. The trucking industry dominates freight transportation in both tonnage and revenue. Intermodal rail continues to be the fastest growing way to move freight and is projected to grow at an average 4.9% over the next 10 years.

Challenges facing the trucking industry include: burdensome regulations, driver shortages, average age of truckers (55), poor image of truck drivers among consumers, high number of small operators, and a high turnover at the largest trucking companies. If one considers these challenges in light of the huge projected increases in freight movements in the U.S., the perfect storm is brewing.

Economically, the fundamentals of supply and demand will always govern truck capacity and right now, the factors affecting truck supply include: increased government regulation, the worsening driver shortage, and increasing barriers to entry.

Truck weights are a limiting factor to freight volume and some proposals around the country are gaining momentum towards increasing truck weights. However, increasing carrying weights alone will not solve the problem.

On driver issues, high profile accident cases draw negative attention to truckers, the industry, and the company shipping the freight. There are several scores and screenings used by those hiring truckers and there are regulations like hours of service, electronic on board recorders, etc. to monitor performance. However, while regulations are supposed to make moving freight/trucking safer, regulations are not designed to do that. What is needed is more of a focus on accountability and personal responsibility.

How are shippers to deal with the perfect storm? Freight shippers will need to stay well informed, to plan ahead and not automatically assume trucks will be available. They will also need to perform due diligence on carriers and treat them as essential business partners. Finally, shippers will need to budget for reasonable freight cost increases as a declining supply of drivers runs up against increasing demand for freight movement.

In terms of dealing with the driver shortage, Fielkow’s trucking company tries to live by the THREE “T”’s, Treatment, Transparency, and Trust. The company made a breakthrough in recent years by creating a Driver Committee to provide input into company policies and procedures. The company tries to develop a culture of appreciation for its drivers and to make messages to them personal: you are not just a driver, you are the backbone of our economy and a key player in the global supply chain.

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On infrastructure, generally, the U.S. had a world class infrastructure, but we are squandering that competitive advantage. The stimulus was an opportunity to make our infrastructure the priority it should be, but we didn’t. Americans need to understand that not all taxes are bad. What is bad is waste or wasteful spending, not investment using tax dollars. Truckers are willing to pay a new fuel tax to ensure future investment.

Our most immediate needs are: multi-modal infrastructure, attention to our roadways, and changing the Obama administration’s bias towards rail over trucking. It’s important to note here that when talking about moving freight, it’s not a ‘rail versus truck’ thing. We need both modes in this country; we can’t get everything where it needs to be just using rail, we need trucks to get it the rest of the way or between modes. Therefore, we need both.

Farmers and all of us in the trucking, freight, and agricultural industries should always make sure that infrastructure and investment in infrastructure are a priority when we are talking with elected officials.

Port of Houston – Brian Fielkow

The Port of Houston (POH) is strategically located, boasting nearly 40 million consumers within 500 miles, is a gateway to the U.S. and North American market, and offers easy access to Mexico, the Caribbean, and Latin America.

In terms of business climate, Houston has low taxes and government regulation as well as a low cost environment and excellent labor environment. Houston has a world class airport system, extensive railway access, an efficient road and highway system, and a well-developed seaport.

According to the Port of Houston Authority (PAH) the port has begun and is looking at significant improvements, particularly to the Bayport Container Terminal and to the Barbours Cut Container Terminal. The 10 year investment will be $10 billion for Bayport and $700 million for Barbours. Among the proposed Bayport improvements are channel deepening to 45 feet and widening to 300 feet. Barbour channel improvements are new expanded cranes and deepening of berths.

The POH hosts most global container carriers and has excellent rail carrier connections. Because of the port’s location and features, it will have tremendous potential to take advantage of increased volumes via Panama Canal shipments, particularly with the above-referenced improvements.

Monday, Sept. 1 – New Orleans, Louisiana Dave Carr, Chair of Day

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ADM Grain – Darryl Peltier and Bruce Nelson

ADM’s Grain Division has Gulf Export facilities in Louisiana, Ama, Reserve, and St. Elmo. The function f ADM’s Gulf Export Elevators’ is to support all export sales. Together, the facilities load more than one-billion bushels per year. Those shipments include more than 22 types of grain and grain by-products that are delivered to more than 600 vessels. ADM’s facilities ship grain or processed product to more than 57 different countries.

The IFB group visited the barge unloading facility in Ama. Terminal manager Daryl Peltier gave an overview of the facility and its challenges. As with most of the other visits on this trip, water depth and cargo, whether it be grain, bulk, or container, handling capacity were key issues. Bruce Nelson then provided a tour of the operation.

The barge unloading facility is located on the Mississippi, across River Road and the levee from ADM’s grain elevators. In the barge unloading area, barges are kept under roof to be opened and unloaded. They are unloaded with a bucket conveyor and skid steer loader that are placed into the barge from above. From the bucket conveyor, the grain goes via belt, either on conventional rollers or via a newer, lower maintenance air ride, back across the levee to the grain house (elevator). There the grain is stored, dried, and placed in bins, waiting to be loaded on to ships. ADM does very little drying at the facility and is not set up to dry because of the quantity of grain the facility handles.

The grain is drawn and blended, according to buyer and or destination, then belted back across the levy to the waiting ship. The entire operation is directed from the Control Room. There, three men with video screens watch unloading and loading via computers and large screens, constantly monitoring what bins the grain comes from and how it is blended. In the next room, inspectors from USDA and ADM assess samples to certify the specifications for each load. Samples are collected from the conveyor belt at certain time intervals.

When asked about maintenance of the shipping channel or river itself, note was made that ADM does not own a majority of its barges; rather, it leases them from its sister company Artco located just downriver. Artco is a member of Louisiana Maritime Association and is the organization engaged with the river issues of concern to ADM Ama. On some projects, ADM cooperates with other entities and companies along the river (e.g., Cargill, Zennoh, BASF, power companies, oil companies, etc. to work on items of mutual interest.

Tuesday, Sept. 2 – New Orleans Ron Pierson, Chet Ester, and Nelda Burnett

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Zen-Noh Grain – Eric Slater

Consolidated Grain and Barge CGB, is managed by Zen-Noh Grain, which is part of Japan’s Zen-Noh Cooperative (8 million members). This facility, located on the lower Mississippi River in Convent, Louisiana, employs 150 people and operates 24/7. Zen-Noh loaded its first vessel here in 1982 and now loads 250 ships (500 million bushels per year).

The facility can load vessels at a rate of 120,000 bu/hr and an entire Panamax vessel within 24 hrs. Every vessel loaded at Convent holds the equivalent of an entire season’s production from 21 average-sized American family farms. Barges are unloaded at a rate of 100,000 bu/hr (or 1 barge of grain in 45 minutes), railcars at 50,000 bu/hr, and trucks at 15,000 bu/hr.

The control room was an impressive display of technology to monitor and move the grain. The grain is weighed, tested and then moved into one of 60 storage or 12 shipping bins. As the grain is moved, the grain dust is removed and processed into feed pellets, which are shipped out by truck and rail. Approximately 100 tons of grain dust per day are collected during loading and all of it is made into feed pellets for cattle feed.

Zen-Noh recently spent $35 million in facility improvements (Phase I of a III Phase Expansion Plan). Thirteen million dollars will be spent in Phase II before moving on to Phase III.

Zen-Noh needs to dredge the dock area annually. Getting the needed permits just to dredge their dock area is a difficult and time consuming process. It “only” took Zen-Noh 5 months to get a dredging permit from the Corps of Engineers because the company used every resource it could to speed up the process. Typically, permit acquisition takes 9 months due to regulatory requirements and a backlog in the permit area (there are not enough permit writers to handle the demand). Demand for permit writers is expected to increase because $111 billion is being spent in expansion projects from Mobile, AL to Lake Charles, LA.

Port of South Louisiana - Paul Aucoin

The Port of South Louisiana (POSL) is governed by a board of seven elected Commissioners. The port stretches 54 miles along the Mississippi River and is the largest tonnage port in the western hemisphere. POSL, which handles imports and exports on both sides of the river, moved 270 million metric tons on 4,000 vessels last year. The port is also the largest energy port and has 7 grain elevators. Six major oil and gas pipelines serve the port and a $2.2 billion expansion is planned at one of the four major gas refineries there.

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The POSL is a popular port for energy and other companies due to the low cost of natural gas and lots of open land for development. The port is forecast to experience $72 billion in industrial expansion over the next 5-10 years. Part of that increase will be needed freight shipping capacity and part is due to energy trends. The low cost of natural gas has increased interest from both foreign and domestic companies interested in sites at the port. Crude oil storage and crude oil for export will also likely be the “next big play” at the port.

The Port is capable of moving cargo to open or covered storage warehouses, from ship to barge, truck or intermodal rail transfer. The Union Pacific Railroad provides service on the west bank to the western U.S. markets and the Canadian National and KC Southern on the east bank serve the Midwest, Canada and Mexico. Truck traffic is designed to flow smoothly with accessibility to several interstate highway connections. Bulk cargo movement is expected to increase significantly due to Panama Canal expansion, so the POSL wants to be able to serve customers appropriately.

For the port operate effectively throughout this growth, it needs warehousing, maintenance, repair, and container facilities. Current port operational costs are about $14-15 million dollars a year. Plans are being made to spend $12 million for additional warehousing. The port hopes to have a full scale container facility one day. For now, the Globalplex Intermodal Deep-draft Terminal allows handling and storage for bulk, break-bulk and some container cargo.

Support from the state of Louisiana is very good with the state providing grant funding where appropriate. A state senator chooses port commissioners and they are approved by the governor.

The importance of WRRDA and dredging to 50 feet was mentioned right up front. The port has a good relationship with the government in terms of funding. An estimated $72 billion worth of further economic expansion between Baton Rouge and New Orleans is expected due to proposed dredging applied for in WRRDA.

Some port bridges are not tall enough for newer, larger ships and the river needs to be dredged to accommodate larger vessels. Container ships are presently limited in size in order to pass under the bridge at New Orleans. The POSL would like to increase the channel depth from 47 ft. to 50 ft. but has not received funding from WRRDA at this time. The high ranking of this port (in terms of its importance to the energy sector) helped move POSL’s proposal forward.

In addition to river, rail and road transportation, the Port owns St. John the Baptist Airport; providing convenient air transportation for prospective

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business partners but not yet offering cargo shipment. Part of the Port’s mission towards providing economic development for the region includes financing assistance through tax-exempt bonds that allows transfer of ownership from the Port to the company when the bonds are paid off. The Port also provides fire protection, security and specialized training as needed.

Port of New Orleans – Paul Matthews

The Port of New Orleans (PONA) is a deep-draft, multipurpose port that was founded in 1718 as the original city (now the French Quarter) was being established. Over the years, as the port expanded, the city also expanded. Further port expansion is no longer an option because the land to the north of the port is part of the guarded “historic district” and the south side is bordered by the Mississippi River. Therefore, PONA focuses on maximizing usage of existing land.

One example of this is PONO’s huge investments into port infrastructure to handle cruise ships and passengers. PONO is the 6th largest cruise terminal in the U.S. and like Galveston, has paid attention to cruise passenger needs and how to capitalize on the movement of these passengers through the port. In addition to dedicated parking garages for cruise passengers who drive to New Orleans to board, the port has elevators, escalators, and walk ways from cruise ship docks up to a large indoor mall area where passengers can shop. In addition, various day tours as well as shuttles to Bourbon Street are offered from that area. Tourism remains a key contributor to the New Orleans economy as is evidenced by the considerable thought and planning that went into this development.

The port is situated 100 miles upriver from the Gulf of Mexico so security is a priority. PONA has 25 miles of riverfront and moves a half a million containers per year. The port generates $2.8 billion in tax revenue and provides 380,000 direct and indirect jobs. If this port were to close, $300 million in revenue per day would be lost.

In addition to the waterways, all six Class 1 railroads serve the port and the port has access to the interstate highway system for trucking. PONO ranks #3 in U.S. for steel imports, #2 for coffee imports, #1 for imports of natural rubber, #1 for chemicals exported and #1 in exports of frozen poultry.

New Orleans Cold Storage – Joseph Kanode

New Orleans Cold Storage and Warehouse, located within the PONA is the oldest cold storage company in North America. The facility provides warehousing services and flash freezing of poultry and meat products. The

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facility is the #1 exporter of poultry in the U.S. handling primarily chicken, but also some pork and beef.

Every day, 1.25 million pounds of chicken comes in fresh and the facility freezes it to 25 below zero for 36 hours. Most frozen products are stored at 30-36 degrees and have already been inspected before coming into the facility, although USDA does occasional on-site inspections NOCS’s services include every type of handling from truck to rail, container and break bulk vessel loading and unloading.

The facility loads 100 containers a week with 60,000 pounds each of frozen poultry. Refrigerated containers have electric hookups when on dry land and have designated space on ships. Interestingly, while at the facility, we saw many pieces of white paper laying on the floor that said “Russian Product” – clearly ripped off pallets of product that had to be rerouted to other countries due to Russia’s ban on U.S. poultry now just a few weeks old.

Big River Coalition – Sean Duffy

Sean Duffy with the Big River Coalition met with the group over an exceptional dinner at Dickie Brennan’s Steakhouse. Sean spoke about issues related to WRRDA and the difficulties getting funding through Congress. Major challenges include getting funding to repair/replace locks and dams along the river that should have been replaced in 1956 and deepening the lower portion of the Mississippi to 50 feet.

In addition, dredging is needed the 250 miles from Baton Rouge to the Gulf of Mexico at an estimated cost of $300 million. The project would be conducted in two phases, Phase 1 would cover the lower 25 miles at a cost $190 million while Phase 2 would cover 120 miles upriver at a cost of $110 million. The project is a 50/50 cost share (50% from the state level and 50% from Federal funds). The dredging soil will be used to create more than 1000 acres of land but no real plan in place regarding the destination of that soil and its environmental impact. Also yet to be determined is what the maintenance cost would be if the river channel is deepened to 50 ft.

Mention was made of the Harbor Maintenance tax of 1.25% on incoming freight. The Harbor Maintenance Trust fund has $8 billion in it. Why, then, is there no money available for dredging?

Mr. Roger Dennison representing the coal industry in Illinois joined the group briefly during dinner, answered some questions about the coal industry’s support of river improvement projects, and offered his support to improvement efforts.

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Wed., Sept. 3 – Savannah, Georgia Rock Katschnig and Brian Niemann, Chairs

Georgia Ports Authority (GPA) – Lee Beckman

The Port of Georgia (POG) is the largest container port in the U.S. handling 7,000-8,000 containers per day and carrying 9% of the global container trade. Containers are transported in and out by truck (80%) and rail (20%). Approximately 52% of POG’s handled freight is imported and 48% is exported. The POG is the #1 Caterpillar Equipment exporter. POG contributes $67 billion to the state GDP and $5 billion in federal taxes. The POG continued to grow the past 14 years, even throughout the recession.

POG is the western most port on the U.S. east coast. It has great access to Interstates 16 and 95. The port is exceptionally well located to the major population centers in the U.S.

POG is expecting $400 million in grants from WWRDA for improvements. Once permits are in hand, the port plans to move forward with upgrades, dredging and other improvements, regardless of federal appropriations. POG is committed to making the improvements and will secure funding from public and private sources.

JIMCO Transloading Facility – Brad Ashton

The JIMCO facility, located near the end of a rail spur, handles many different types of product, including: liquid fertilizer, alfalfa meal, liquid latex, and Distillers Dried Grains (DDGs). Currently, DDGs are the main product JIMCO off-loads from rail cars into containers for export. DDGs are a difficult product to handle due to their tendency to cake up in rail cars and containers. With the volume of DDGs handled by the facility, one of the chief concerns at the moment was China’s rejection of some biotech corn varieties in DDGs. To date, this hasn’t been an issue for JIMCO.

What was most interesting to the group was the need for and viability of smaller transload operations (like JIMCO) in order to meet the demands of multiple-sized buyers.

Lineage Logistics – Richard Sutton

Lineage Logistics is the south eastern U.S. cold storage location for Dole; handling pineapple juice, fruit cups, fruit snacks and Fiji water. The facility is a very interesting transfer, warehousing, and trans-loading point. Early September is an extremely busy shipping time for Lineage due to it being "Back to School" time.

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The facility imports 7,000 containers per year and exports 3,000 per year. Lineage has 13,500 pallet positions and rents the shelving equipment. The warehouse is kept at 45 to 50 degrees to promote freshness and lengthen shelf-life of the products – which is at the facility for 4-6 weeks at the most.

In terms of challenges for the facility, the 90,000 “hand pics” that had to be made the day of our visit were to satisfy the biggest and most challenging customer - Walmart. Seventy percent of Lineage’s business is Walmart, so the company has to meet Walmart’s requirements. “Hand pics” mean sending a partial pallet (rather than a full pallet) to a distribution hub. Breaking down pallets from fully stocked pallets is a time-consuming and labor intensive job, even with all of the inventory management and equipment at Lineage.

Another challenge is that the Fiji water box packaging, made from recycled paper, is not very durable. The boxes deteriorate more quickly and pose stacking problems. Broken or damaged product is donated to 2nd Harvest food pantry but must be grouped with same bar coded lot due to food safety specifications. Every piece of product can be traced to its production period and location. This is an excellent example for consumers about the security of the products they buy!

A final challenge at the facility is the added cost of doing business due to the strength of the International Longshoremen’s Association. The cost for an ILA member to observe a vessel being loaded or unloaded (called “manning” the vessel) is $35/hr., overtime is times 1 1/2, weekends are x 2, and holidays are x 3). The number of employees needed is negotiated between the business and the ILA, with the latter generally requiring 4 times the number the business requests for the job.

Thursday, September 4, 2014 – Savannah, Georgia Larry Beck, Chair of Day

Georgia Innovations/Logistics Company - Page Siplon

Innovation means introducing something new. Technology is changing rapidly, but some companies never really innovate (e.g., Kodak) and end up going out of business. There can be a lot of innovation in ways of moving cargo change (maybe this will be done by UAVs someday like Amazon hinted). If one looks at Amazon’s announcement about delivering packages using UAVs; that was a total marketing ploy. FAA does not allow commercial use of UAVs. But what a great way to drive consumers to Amazon’s site. After reading the announcement, many people decided to do some shopping, on Amazon.com.

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Successful companies innovate and many of them, particularly in infrastructure and logistics, will innovate using technology. One of the considerations we all need to have is: How do we use technology in the best manner possible? Every supply chain is unique and each one will offer different opportunities for use of technology.

Georgia has many unique characteristics that give it advantages in terms of moving freight. First, the top-ranked national highway system passes through. Second, the most extensive rail network in the South East passes through the state. Third, Georgia has the world’s busiest passenger airport (#10 for cargo) with Atlanta Hartsfield Jackson Airport. Fourth, Georgia is home to a majority of the top service companies. Fifth, Georgia is also part of the national core for technology providers. Sixth, Georgia has the fastest growing port and the 4th largest in the USA, the Port of Savannah (POS).

If a line is drawn from Dallas to Chicago, 70% of U.S. consumers live east of that line; so the POS is incredibly well located. When commercially feasible, shippers want close access to major population centers. The POS is best positioned to serve approximately 44% of the U.S. population.

Based on projections, the U.S. will need to move 4 billion more tons of freight than it does now. UNCTAD & UNESCO project higher demand for freight movements (particularly in urban areas) and for many exports like agricultural products and food. A global commercial hub, POS is well-located and capable of meeting this demand. Savannah boasts 37 weekly services that reach global markets including 11 services via the Panama Canal and 11 via the Suez Canal.

However, existing U.S. port infrastructure plus Panama Canal expansion are making for some challenges and spur the need for investment. Shallow harbors cost U.S. shippers $7 billion in added costs in 2010. Private freight railroads spent an additional $20 billion per year due to deficiencies in rail systems, while U.S. businesses spent around $27 billion per year due to highway deficits. In other words, if current trends continue and investment in infrastructure continues to lag, the U.S. GDP will lose an estimated $4 trillion by 2040 due to added infrastructure costs or decreased efficiencies.

To stay competitive and prepare for future demand, Savannah is making improvements. One is the Savannah Harbor Expansion Project of SHEP; which is seeking WRRDA matching funds. POS is so confident that it will get federal government approval for the project on the back end, that it collected all of the other money up front. This is the only WRRDA project like this. State funding available equals $266 million and the current governor is determined to use these state funds to begin construction.

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The state of Georgia looks at logistics as one of its major industries. Georgia is the only state that has logistics as a part of its state government.

Georgia Department of Agriculture – Bo Warren

The Georgia Department of Agriculture (GDA) is largely a regulatory agency and only spends 3% of its budget promoting product (they have a Georgia grown program). It views part of its job to help keep people in business; therefore, it acts like a chamber of commerce. GDA is kind of a one-stop shop that helps companies come into compliance with state laws.

In terms of resources, GDA has an international trade division and the Center for Innovation and Logistics. Tobacco settlement dollars funded the Center for Innovation.

Savannah is perfectly situated to be a major contributor to freight movement in the U.S. It is a 2-day drive from most of the consuming population of the U.S. in addition, 22,000 highways cross Georgia, 12,000 Interstates, and 5,000 rail lines.

Some trends in freight movements: By 2035, container vessels will have a capacity of 12,000 TEUs. Panama Canal expansion will lower freight expense by 20-40%. Los Angeles is #1 container handling: 8 million containers per year. Savannah is in 4th place, handing 3 million containers each year.

Georgia produces 29 million pounds of poultry per year, making it the number one commodity y value in the state. Georgia is the second biggest in cotton, with 2 million bales of cotton per year. Peanuts are the third largest crop. Georgia produces 49% of the country’s peanuts. Georgia also produces a high volume of dairy products.

USA Poultry and Egg Export Council (USAPEEC) – Jennifer Geck

USAPEEC is a membership organization comprised of companies and organizations involved in the poultry and egg industries and trade. Illinois Corn Marketing Board, Illinois Soybean Association, and Illinois Farm Bureau are members of the USA Poultry and Egg Export Council. USAPEEC is also a federal Market Access Program (MAP) cooperator, so its funding from industry and commodity groups is partially matched by government funds.

The mission of USAPEEC is to increase U.S. poultry and egg exports by: 1) protecting markets, 2) opening up markets, 3) developing markets, and 4) serving as the industry’s voice on trade policy issues. Based in Stone Mountain, Georgia, USAPEEC has 14 international offices in major export

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markets including China, Japan, South Korea, Mexico, Russia, Europe, and the Middle East.

Production of poultry and eggs consume 50% of U.S. soybean meal and 33% of U.S. corn. In terms of exports of poultry and eggs, export value has been steadily increasing since the 1990s, with major jumps in 2006 and 2010. Overall, between 1991 and 2013, export value increased from $750 million to nearly $6 billion. That $6 billion in poultry and egg exports translates into 330 million bushels of corn and more than 160 million bushels of soybeans.

U.S. poultry exports leave the U.S. via several ports: 25.5% from Savannah, 4.1% from Houston and Galveston, 7.5% from New Orleans, and 4.9% from Norfolk.

Friday, Sept. 5 – Norfolk, Virginia Paul Beisiegel, Larry Miller, JC Reitmeyer

Port of Virginia Authority (VPA) - Greg Edwards

The Port of Virginia consists of two organizations, the Port Authority, managed by the State of Virginia, and VIT, the operating port. There are 440 employees and the VIT owns and operates the port. The POVA is fortunate to already have a 50 foot plus shipping channel (needed for naval vessels) and Norfolk is home to the world’s largest naval base.

POV is an economic engine for the state, generating 343,000 port and related jobs, $41 billion in business revenues, and $1.2 billion in state and local taxes. Increased port growth results in more jobs and revenues for the state.

The mission of the VPA is to foster and stimulate port commerce, act as the eastern gateway for global freight movement, secure necessary improvements in the waterways, and perform any act or function useful to developing and increasing commerce.

Like Savannah, the Port of Virginia (POV) is very well located; within a day’s drive of 2/3 of the U.S. population. With facilities including Norfolk International Terminals, Portsmouth Marine Terminal, APM Terminals in Virginia, the Port of Richmond, and the Virginia Inland Port, the POV has a statewide footprint.

The largest of these is APMT terminal, now called Virginia International Gateway or VIG. Built by Maersk Shipping, VIG is now leased and operated by the POV. VIG is one of the only functional automated container terminals in the Western Hemisphere and is a U.S. Customs-designed port of entry. Fully automated cranes (controlled by operators nearly ½ mile away using

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cameras) are used to organize containers in the yard and load or unload ships. With 231 acres, a 3,205 foot pier, 8 cranes, a channel depth of 55 feet, and served by CSX and Norfolk Southern Railroads, the facility has an annual capacity of 1 million TEUs1. VIG has a total footprint of 576 acres and in the next stage of development, will add 60 acres of additional space and another one million plus TEUs in capacity.

POV is working very hard to optimize port facilities, including the already completed APM Terminals, refurbished NIT and PMT terminals, and a future CIMT terminal. The goal of all of these additional or improved properties is to better facilitate freight movement and to increase the port’s throughput. POV set a record for TEU volume in fiscal 2014 of more than 2.3 million TEUs, an increase of 6.5% over FY 2013. Of that total volume, 62% was transported by trucks, 34% by rail, and 4% by barges.

POV’s top export commodities are paper and paperboard, wood pulp, soybeans and products, logs and lumber, pet and animal feeds, grains and flour products, and grains and flour products, grocery products, mixed metal scrap, poultry, and meat. Clearly, POV is a key agricultural export location.

One way that Virginia keeps agriculture and infrastructure front and center in local economic discussions is via an annual “Governor’s Conference on Agriculture and Trade”. The event is organized by Virginia Tech, the Virginia Department of Agriculture, Virginia Farm Bureau, and the Port of Virginia. Now in its fourth year, the event continues to get bigger and bigger. Next year’s event will be held March 9-10, 2015 in Richmond.

Perdue AgriBusiness – Greg Hansen, Sharon Clark, and Greg Rowe

Most are familiar with Perdue Farms poultry but not with Perdue AgriBusiness. Others think the agribusiness side is something new. In fact, Perdue’s first grain receiving and storage facility was constructed in 1960 in Salisbury, MD. Today, the company handles about 300 million bushels of grain a year and has more than 70 million bushels of storage space at 70 locations.

Perdue AgriBusiness exports grain and feed ingredients and supplies grains and feed ingredients to major domestic agricultural companies. Products include: high protein soymeal, corn, soybeans, soft red winter wheat and edible oils. Of these, soybeans are the largest export crop.

1 TEUs are twenty foot equivalent units, the common measurement used to talk about cargo carrying capabilities of ships. 1 TEU is a 20 foot container. Today most cargo is moved in 40 foot containers.

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The company manages a private fleet of covered hoppers and tank cars, which are operated in the U.S. and Canada. It also has barge loading capabilities in the Great Lakes, Ohio River and Mid Atlantic areas. The company continues to see demand for products shipped by container. The company ships thousands of rail cars per year and traces several thousand cars each day.

Perdue AgriBusiness is challenged by rail rates, equipment, service and capacity. Rates are increasing annually and there has been a shift in rate structure between contract and tariff. On the equipment side, the cost of hopper cars has increased from $70,000 to $105,000 in the past four years. For tanks, the purchase cost has increased from $80,000 to $130,000 over the same time period. Due to new proposed flammable liquid regulations up to 74,000 tank cars may be required to be retrofitted or re-built. For newly built equipment, buyers have to wait until the third quarter of 2016.

On the rail service side, railroads report crew shortages. Trains sit for as long as 10 days waiting for crew and power, and there is inconsistent service making it difficult to manage inventory. On the capacity side, turn times on unit trains have dropped (this also results in lost trading opportunities). Interchanges between railroads are major bottlenecks, and railroads limit the number of trains customers can run on their lines.

Perdue AgriBusiness truck markets are also impacted by rates, capacity and regulation. On the rate side, operating costs continue to rise (e.g., fuel, tolls, equipment, and driver pay). Competition for trucks is forcing rates higher because Perdue competes for trucks across multiple industries. On capacity, the seasonality of Perdue’s business makes it difficult to obtain trucks. Small truck operations are more subject to economic downturns, and driver shortages continue to plague the trucking industry.

On the regulation side, the Federal Motor Carrier Compliance, Safety and Accountability Program (FMCCSA), hours of service rules changes, and electronic on-board recorders are just some of the regulatory issues facing the trucking industry.

ARREFF – Gloria Lambert

Like JIMCO, the ARREFF terminal is geared towards bringing in bulk materials to be broken down into shipments of many sizes. Then, it is loaded back into containers to be sent to buyers via large ships. Like JIMCO, ARREFF sits right on a rail spur, but is somewhat land locked and didn’t appear to have room to expand.

Coastal Commodities – Rico Di Mattia

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 Coastal Commodities is a business just getting started in loading bulk containers. At this time the company is limited without a dock but has plans for expansion. The company is also limited in container loading because all of the commodities have to be trucked in and out. At this time, the company does not have any bulk bins or blending equipment at this time.

Participants in the Infrastructure Study Tour found these smaller transload facilities very interesting and very necessary to the other larger players in the freight and commodity shipping businesses.

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