Does Dredging Make Economic Sense?

photo credit: NOAA

St. Johns RIVERKEEPER continues to have the following concerns, regarding the proposal to dredge the last 13 miles of the St. Johns River channel from 40-feet to 47-feet deep:

The environmental impacts to the river have been significantly underestimated.
The proposed mitigation plan does nothing to offset the damage from dredging.
The economic and environmental risks have been ignored or downplayed.
The projected economic benefits have been dramatically overstated.
Relevant information and facts have been excluded from the analysis and/or public debate.

To learn more about the proposed dredging issue click here.

While St. Johns RIVERKEEPER is primarily focused on the potential environmental impacts, the economics of the project are obviously extremely important to the decision-making process and the degree to which the community is willing to accept adverse impacts to the St. Johns.

Recently, new information was released by Dale Lewis, a retired logisitics expert, who has been conducting an independent analysis of the economics of the proposed dredging of the St. Johns. The results of this extensive work support our position that the economic benefits have been significantly overstated by Jaxport and their consultants.

While Dale served on the Riverkeeper Board from 2000 – 2004, he has not conducted this analysis on our behalf. Dale has put in hundreds of hours of his own accord due to his interest and expertise in logistics, concerns as a taxpayer, and of course, his concern for the St. Johns River. Here are some of his key points.

WHAT HAPPENS IF WE DON'T DREDGE?

We will still be a prosperous port.
Jacksonville is successful today, in the Automotive, Breakbulk, Chemical, Dry Bulk, Steel, Lumber, Poultry, RoRo and Puerto Rico container trades.
None of these trades requires water over 40 ft deep. The Army Corps of Engineers has said that these trades do not benefit at all from deeper water.
The port’s planning documents show that these trades are expected to grow jobs by over 20% from 2020 to 2035.
Jaxport’s documents show that these “no-dredging” trades are worth $100 to $150 Million per year in tax revenues, for more than 25 years, with no deep-dredging required.
And there are additional potential container opportunities, as ship designs change.

WHAT DO YOU MEAN? DON'T BIGGER SHIPS (MORE TEUs PER SHIP) HAVE TO MEAN DEEPER DRAFT?

No. Maersk has recently built 16 new “shallow draft” ships of 8,600 TEU capacity, drawing just 39 feet of water.(Jaxport is 40 ft)
These ships have shallower draft and 10% better fuel economy than previous ship designs.
Maersk built these 16 new vessels, investing $2.2 Billion, so they could more-efficiently serve the Europe / Brazil market.
As an ocean carrier, Maersk also invested over $1 Billion into Brazilian port improvements and has established a training school for Brazilian dock workers and ship’s officers.
Why would Maersk do this? Because producers and shippers have created a market for goods, and have looked to Maersk to move the goods.
Ocean carriers will build the vessel capacity needed to support shippers who want to serve valuable markets. If investment is also needed on shore, they’ll do that, too.
Don’t give up on fully-loaded 8,600 TEU ships coming to Jacksonville, without dredging.
Don’t assume that the ship designs of tomorrow will look like the designs of today; we could benefit greatly from changes in new, more-efficient container ship designs.

WHAT HAPPENS IF WE DO DREDGE?

First, we invest a total of about a billion dollars. (Dredging is just one part of the overall cost.)
This creates a huge cash-flow requirement.
To reach its cash-flow goals, Jaxport’s plan requires 100% container growth in the first 9 years after dredging.
This would be a huge, rapid change; over the last 3 to 5 years, Jaxport’s container business has grown 1% per year.
Jaxport’s growth plan is 1 Million TEU’s per year (55%) higher than the Army Corps of Engineers’ demand estimate.
This additional 55% growth would have to come from taking 1 Million annual TEUs of market share away from ports in other states, on top of delivering a 3% base growth rate.
The Florida Ports have predicted this level of growth in a long succession of 5-year plans since 1998, yet no Florida port has ever done half this well. To emphasize, Florida’s container ports have not yet reached the annual container volume forecasted in the 1998 Five-Year plan.
From 2003 to 2015, a time when cargo was leaving West Coast ports and actively looking for a home in the East, Florida ports actually lost container market share. Savannah captured 100% of the southeastern market share gains.
Miami, Savannah and Charleston have a path forward in which they can each protect all of their market share for Far Eastern cargo.
Miami’s deep dredge is completed; Savannah and Charleston are moving ahead.
Savannah and Charleston can see a day when they are out of capacity; they have committed to jointly building a new container port on the Savannah River, with state money, on dredge spoil land, exempt from the Corps’ economic analysis process.
The environmental permit process for the new Savannah port has officially begun, 10 years before the need becomes critical, positioning Savannah for continued success.
To the West, Mobile is growing stronger, and is in the process of capturing WalMart’s newest Import Distribution center, bringing WalMart to a total of 6 Import DCs in the USA.
Jaxport proposes a very ambitious plan, one never accomplished by a Florida port.
The markets to the North, South and West of us are protected by strong competitors. Their advantages include much more than water depth.
To succeed, Jaxport would have to capture a much larger share from these ports than it does today, capture it quickly, make sure that it grows and then hold on to it for more than 25 years.
This level of competitive performance would be more than triple anything ever accomplished by any Florida container port.
It takes a billion dollars to make the attempt.
Do you really believe that Jaxport’s most aggressive sales projection ever, 100% growth in 9 years, will come true? That’s what it would take. It’s hard for me to believe.

THE PROJECT'S ECONOMIC RISKS INCLUDE:

Long-term, excess regional container capacity, with 3 strong East Coast competitors, making it difficult for Jaxport to capture market share at the aggressive pace shown in the plan.
Overstated local benefits for container jobs, payrolls, and tax revenues.
Cost overruns, which tend to be underestimated in large projects. Read this Florida Times-Union article about how the Army Corps has routinely underestimated the costs of dredging over the last 50 years.
Decision-making without a published economic valuation forecast for the port’s other trades if they were pushed aggressively, including: Automotive, Breakbulk, Chemicals, Petroleum, RoRo and Puerto Rico containers. None of these trades requires water over 40 ft deep.

In order to help facilitate a more informed decision on the proposed dredging, Dale has been meeting with elected officials, local business leaders and members of the media to share his findings. We are hopeful that Dale's efforts will lead to a robust community dialogue and more honest assessment of the pros and cons of this project.

With a pricetag of nearly $1 billion (once cranes and required infrastructure improvements are included) and the future health of the St. Johns River on the line, we can't afford to get this decision wrong.

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