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Cover Story: A rising tide

Port experts see opportunity in emerging marine and freight shiping trends

By Douglas Rooks

Maine has a 'large, market-driven opportunity' to build a new container terminal at Searsport, according to a new study of Maine’s three-port strategy, the basic focus of state maritime policy since the 1980s.

The study, conducted by the Cornell Group of Fairfax, Va. for the Maine Port Authority, an independent state agency affiliated with MaineDOT, surveys facilities, customers, and markets for the three ports at Eastport, Searsport and Portland, finding challenges and opportunities for each operation.

Port operators are still digesting the 110-page study, which provides detailed analysis and some bold conclusions, and it is safe to say the discussion will continue for some time to come.

By the numbers

Most of the cargo that moves through Maine’s seacoast is in the form of oil – 27 millions tons of it through the tank farms in South Portland, built during World War II. Still, Maine’s capacity to handle oil is stagnant, and the possibility of expanding petroleum handling along the coast is unlikely. Maine has seen several liquefied natural gas (LNG) terminals proposed recently, but none related to oil.

The focus for new port business is liquid and dry bulk commodities, break-bulk and containers. In that respect Maine’s three major ports are highly competitive. Portland is still the leader in dry traffic at over 660,000 tons in 2006, but Searsport, with its new facilities at Mack Point operational, is not far behind, at over 500,000 tons. Eastport is third at 300,000 tons. The state total of 1.65 million tons was just off the record set the previous year.

The long-term prospects for Maine’s maritime trade are excellent, said John Henshaw, the new executive director of the Maine Port Authority. Henshaw comes from a supply chain management background – from Fairchild Semiconductor in South Portland – and says he’s trying to learn everything there is to know about ocean shipping.

What he’s found is that the growth of world trade, plus the steeply increasing price of energy, means that a lot more goods will be transported by water in the near to mid-term future. “We have the location, the access, and the workforce to contemplate major expansion,” he said.

Rob Elder, of MaineDOT’s Office of Freight and Business Services, said that ports will not be confined to the blue water shipping that most people think of when they see tankers and freighters and container ships coming and going. “Short-sea shipping, which Portland has excelled at, should be a major growth area,” he said. “The pressure is on to reduce truck traffic along the I-95 corridor, and, along with rail, ports are the best way to do that.”

Elder said that, though Domtar is the major customer for Eastport at the moment, the whole north Atlantic range should be able to find new business over the coming decade. “If you look from Nova Scotia to Maine, shippers will be wanting to avoid the congestion they’re experiencing in New York and the mid-Atlantic. The business will be there, if we can take advantage.”

Private risk, public gain

How Maine will position itself to take advantage of growing world trade is a large part of the unfolding story. Rob Elder says the possibility of a privately financed container operation at Searsport represents a significant evolution from the way Maine has expanded port operations in the past.

When Eastport opened cargo operations in 1981, creating the third of the major ports, it was with an “if you build it, they will come” mission, Elder said. Build it they did; the new pier was constructed at Estes Head at the end of the 1990’s. Eastport, which moved 15,000 tons of dry cargo at the downtown breakwater that year, has grown fairly steadily since, reaching a peak of more than 390,000 tons in 2006. It remains dependent, however, on a single major customer, the Domtar mill in Baileyville, one of the biggest producers of hardwood pulp on the East Coast.

The next major renovation of port facilities came at Searsport during the King administration, when the state built a new pier and portside facilities at Mack Point with funding from a transportation bond issue. The mainland site was once a fuel depot for Loring Air Force Base. The commercial operators, Sprague Energy, are acquiring the facility over 30 years.
The latest plan would be for private investors to lease land from the state but assume full financial responsibility for building and operating a container port, probably on Sears Island. Terms of a Joint Use Planning Committee (JUPC) agreement signed earlier by the state requires the Maine Port Authority to investigate the feasibility of building on Mack Point, but most container port designs will require more on-shore land than is available there. The JUPC is in the process of delineating a boundary for the 941-acre Sears Island. By April the group will propose dividing the island into a 600-acre conservation easement, with the remaining 341 acres reserved for port development under MaineDOT oversight.

Elder refers to this as a private sector opportunity, with the state acting as host and long-term owner of the site, with private investors taking most of the risks and receiving the benefits of the transaction. A state bond issue for full funding, he said, would not be feasible because of the scale of the operation that the Cornell Group pegs at $197 million. Current expectations are for a two-berth pier that could be expanded to four berths later. If constructed, the Sears Island operation would be a much-delayed resumption of a port facility that the state began constructing in 1978, when they completed a causeway to the island and dredged the channel.

Construction shut down after a protracted battle concerning environmental permits.

Portland’s diversity
While the Cornell Group report points to significant opportunities at Searsport, Maine’s other ports have potential, as well. For Jeff Monroe, Portland’s director of Ports and Transportation, a seaport has the greatest opportunities when it is part of a growing economic region, with a diversity of industrial and commercial users, access to other forms of transportation, and significant population densities. In Maine, Portland best meets all those descriptions, he said.

“We have shippers, customers, rail access and great diversity on the water – cruise ships, ferries, commercial fishing, tankers, containers and bulk. This is a very cyclical business. You need to have a lot of different users, such as we have here. And you also need the support network that provides a critical mass.”

Portland, he said, can be competitive for the same uses projected at Searsport. The city is still reorganizing its commercial operations with completion of the first phase of the Ocean Gateway project, with the containers at the International Marine Terminal moving into the former ferry terminal. “We’re looking to the long term as we expand and reconfigure our operations,” Monroe said. “The city council is strongly behind our working waterfront, and we don’t expect that to change.”

Developing markets for Eastport?

In Eastport, longtime port operator Skip Rogers, general manager of the Federal Marine Terminals (FMT) division there, is seeing the best of times, but has concerns for the future. Rogers has seen record tonnage from the Domtar pulp mill over the past two years, but the future for northeast hardwood pulp is not assured, he said. “As the eucalyptus plantations in the tropics gear up, it puts a lot of pricing pressure on the traditional mills,” he said. “No one is sure just where this will end up.”

Rogers said the key to making the Eastport terminal more productive is rail access, something the port has always lacked. A rail link capable of moving contemporary cargo would involve an expensive trestle, something the state has never included in its transportation planning. To Rogers, that’s unfortunate. “We have unlimited deep water access,” he said. “You could bring any ship in the world here, and you don’t have to dredge, as you do in Searsport.”

FMT manages freight terminals in Tampa Bay, Richmond, Virginia. Cleveland, Milwaukee, Albany, Burns Harbor, Indiana, and Toronto. FMT’s Rogers sees a lot of unrealized potential at Eastport. He believes the Cornell Group report should have spent more time developing options there.

Among the potential new cargoes the port is studying are wood pellets, which are becoming a major heat source in Europe and are catching on here, too. The question is whether there’s enough value added to make the product viable for long-range shipping, he said.

“It’s our job to be the engine that could,” Rogers said. “We’re going to take a look at anything and everything.”

Searsport’s moment?

Among the most enthusiastic responses to the Cornell Group report comes from David Gelinas, who pilots ships to Searsport and elsewhere in Penobscot Bay. In January, Gelinas guided the largest ship ever docked at Mack Point, the 800-foot Baldock, registered in the Bahamas, and carrying 75,000 tons of gypsum from Spain. The Baldock, which draws 38 feet of water, used all of Searsport’s capacity, which is about 40 feet at low tide.

“Those of us who work on the water naturally want to see more freight and traffic of all kinds,” Gelinas said of the Cornell Group report. “But these are professionals who work all over the world. They have the numbers that show this is a solid opportunity that can be realized right now. We don’t have to wait and wonder.”

All signs are that, while there’s more potential business for all three ports, a container operation at Searsport would be the biggest addition to Maine’s maritime operations.

The Cornell Group projects a 186 percent increase in worldwide container traffic over the next 20 years, a rate of growth that would overwhelm existing ports. The question seems to be not whether new capacity will be built, but where. “You could locate ports anywhere north of Boston, all the way through Nova Scotia,” said Rob Elder. “But we think there are unique advantages to Searsport, factors that make it truly competitive.”

Among the advantages are, a direct rail link to Montreal and from there to the Midwest. Service is a lot faster and more reliable than most people realize, Elder said. “Right now, you can get a double stack container secure through to Chicago in 52 hours. We’re in the right place, with the combination of deep water and rail access, to attract investment.”

Those who claim that Searsport is too isolated to make a large container operation successful are missing the point, Elder said. “Trans-shipment is a big opportunity, serving big markets in Southern Canada and the U.S. Midwest that we can reach faster and more reliably, given the congestion elsewhere.” Searsport has the advantage of a direct rail link to Montreal and from there to the midwest. Locating a port here, Elder said, provides local opportunities to expand, as well. Shipping rates would be much lower for companies that move large quantities of products in bulk. Processing operations recently set up at Mack Point show what is possible, he said.

Bob Grindrod, president of the Montreal, Maine & Atlantic Railroad (MM&A), confirms and amplifies these points. The MM&A provides a direct link from Searsport to suburban Montreal, and shipping by this route to Chicago and the entire midwest is faster than through more congested networks elsewhere on the east coast. The MM&A maintains one of the largest rail networks in Maine, some 750 miles, from Searsport to Montreal and, from track diverging at Brownville Junction, to far northern Maine, Houlton, and connecting to the Canadian National system east of Van Buren.

Extending track to a container port on Sears Island would be a simple proposition, since the existing causeway was built to accommodate rail, he said. The MM&A is already capable of double-stacking containers, which, as one might imagine, doubles the capacity of rail cars.

Currently, the railroad moves significant amounts of bulk freight, including lumber and pulp. Another growth area is heavy oil for industrial facilities throughout northern Maine, including mills in Madawaska, Fort Kent, Presque Isle, Caribou and Millinocket. The railroad recently shipped a large generator, built by GE overseas, destined for western Canada. “GE was pleased with how the port performed,” he said.

Moving fast enough?

Others question whether the state is moving fast enough to seize the opportunity. Dave Gelinas is critical of the agreement under the Joint Use Planning Committee that sets up a 600-acre conservation easement without providing any solid guarantee a port will be built on the remaining acreage. “They say we have the opportunity to use the 341 acres for a port plan, but we had 941 acres before, and we gave up 600,” he said. “To me, the port plan should have moved forward at the same time as the conservation easement. This way, there’s no guarantee we won’t have the same kind of opposition and lawsuits we’ve had in the past.”

It isn’t too big a leap to imagine a Sears Island container port as a major money-maker for the state. “Similar sites are being leased for $3,000, $4,000, even $5,000 an acre per month,” Gelinas said. “Imagine what we could do with a 300-acre container port – if we can get it built.”

Gelinas also wonders whether the three-port strategy is really living up to its billing. He points to the modular manufacturing facility that Cianbro is building at the site of the old Eastern Fine Paper mill in Brewer. Access to the Penobscot River is crucial to the construction of the large modular units for a huge oil refinery being constructed on the Gulf Coast.

“This is a big success story for Maine, and it happened without any help from the state,” he said. “What other opportunities are there that we may be missing?”

Rob Elder said that the state welcomes “single purpose” maritime facilities like the Cianbro barge operation, but that the three-port system is meant to support a variety of uses. There are other examples of productive single-purpose waterfront operations, he said, such as the Dragon Cement pier in Rockland, that ships over 100,000 tons of concrete a year from the main plant in Thomaston.

But Gelinas believes that Cianbro’s Brewer plan, important as it is, could represent a missed opportunity, too. “This is a company that’s working in the world market, that’s built giant oil rigs and tanker hulls. They have 14 feet of water on the Penobscot to work with. Imagine what they could do with 42 feet off Sears Island. We may just have given away something of real value.”

If it’s true that a rising tide lifts all boats, then Maine’s ports should be well-positioned to launch requests for proposals in the near future. One of the few aspects of the Cornell Group report that bothers Fred Michaud, a policy development specialist at MaineDOT, is the emphasis on diverting business away from other ports and bringing it to Maine.
“Their own numbers show that there will be a major capacity problem, and that we’ll need new facilities just to handle the growth,” he said. “We don’t have to be taking away business from anyone, and not from any other port in Maine. These should be good times for our ports, maybe great times.”
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