the Port of Virginia leases the Virginia International Gateway terminal in Hampton Roads (originally known as the APM terminal) plus the Port of Richmond, and owns three terminals in Hampton Roads plus an "inland port" in the Shenandoah Valley
Source: Joint Legislative Audit and Review Commission, Review of the Virginia Port Authority's Competitiveness, Funding, and Governance (2013)
International ports have been located in Virginia since the first English colonists arrived in 1607. Early trade involved importing colonists and manufactured goods from England, while exporting raw materials (tobacco, deer hides, lumber) to Europe and food to the Caribbean islands. Virginia still exports raw materials - particularly coal and food - but most international trade today involves shipments not in hogsheads but in containers measured in TEU's, for "twenty-foot equivalent units."
Development of towns and port cities occurred slowly in Virginia. There were few roads in the 1600's or even the 1700's that were passable when the ground was wet, so it was not feasible to use carts to carry hogsheads of tobacco, loads of lumber, or barrels of flour/salted beef very far on land. Plantation owners in Tidewater preferred to ship directly from their wharves, rather than carry goods overland and store them in warehouses at a port until a ship arrived.
The deep channels of multiple rivers, and the colonial government's generous grants of land, shaped the development of Virginia east of the Fall Line. The various rivers connecting to the Chesapeake Bay provided easy access for trans-Atlantic ships to collect cargo from many "necks" (peninsulas) and riverbank wharves in Tidewater.
After a ship arrived at a plantation to load tobacco, the ship's shallops or other local boats would collect hogsheads of tobacco and other material for shipment from the wharfs of smaller, nearby plantations/farms. The use of many small boats to collect cargo from multiple wharfs reduced the number of stops a ship had to make to gather a full load for the return to Europe, but the inefficient collection process required a ship to spend as much as seven unprofitable months in Virginia to obtain 300 hogsheads.1
The impact of physical geography on cultural geography was clearly recognized by English officials, who desired concentrated development to facilitate military defense and collection of taxes. As John Clayton noted in 1688:2
The result, as one recent scholar has noted:3
hogsheads of tobacco were shipped from Jamestown, but away from the colonial capital ships had to stop at multiple wharves built at separate plantations
Source: National Park Service, Jamestown Lifescape - Mid-17th Century (Keith Rocco painting)
Norfolk was Virginia's leading port at the time of the American Revolution. In the 1820's, Richmond surpassed it. The state capital maintained its leadership position until the Civil War, in part because steamships could push up the James River to the Fall Line and in part because Richmond/Petersburg interfered with efforts to build railroads that would connect the interior of Virginia/North Carolina to Hampton Roads ports.
Between the Civil War and World War I, however, ocean-going ships grew larger and required deeper channels. Richmond was unable to get Congressional funding to bypass bends in the James River and deepen the channel. The natural channel prior to the Civil War had been dredged to only 18' by 1916. By the 1880's, the biggest ships required 19' deep channels. Cargo was brought to Norfolk on big ships, then transferred to smaller vessels in order to be "lightered" upstream to Richmond. Additional dredging to 25' during the Depression in the 1930's was too little, too late to save the port of Richmond. (The Corps of Engineers still maintains a 300-foot wide, 25-foot deep channel to Hopewell and a 200-foot wide, 25-foot deep channel to Richmond.)4
As Richmond declined, ports in Hampton Roads grew. However, the cities of Newport News, Portsmouth, and Norfolk ended up managing separate ports that did not cooperate with each other.
In the 1960's the Norfolk Industrial Port Authority expanded the US Army's World War I Norfolk Army Base/World War II Port of Embarkation/Korean War Hampton Roads Army Terminal, expanded by the US Navy in World War II, into Norfolk Tidewater Terminals. By the 1960's, Norfolk was competing against the Portsmouth Port and Industrial Commission (operating the Portsmouth Marine Terminal) and the Peninsula Ports Authority of Virginia (operating the Newport News Marine Terminal).5
The three Hampton Roads ports were consolidated in 1971-72 so Virginia could operate more effectively and draw business away from other East Coast ports, particularly in New York/New Jersey, Maryland, South Carolina, and Georgia. Consolidated operations has increased efficiency and marketing success. In 1980, the Hampton Roads ports were #30 in the United States measured by tons of cargo handled, but by 2013 had risen to #3.6
Through the Virginia Port Authority, a state agency, the Commonwealth of Virginia owns *and* operates three terminals in Hampton Roads - Newport News Marine Terminal (NNMT), Norfolk International Terminal (NIT), and Portsmouth Marine Terminal (PMT).
In 2010 the Virginia Port Authority also leased the privately-owned Virginia International Gateway (VIG), built originally as the A.P. Moller Terminal (APM). The state committed to pay $40 million annually for 20 years. That $450 million, highly-automated facility was built in 2007 as the largest private container terminal in the country, but the recession left it underutilized while the Virginia Port Authority had long-term contracts for container traffic at the inefficient Portsmouth Marine Terminal.
By leasing the Virginia International Gateway facility until the year 2030, the state gained an efficient terminal without having to borrow money for the initial capital investment, while the private company gained a steady stream of guaranteed income. After the Virginia Port Authority shifted its business to the new APM/Maersk (APM) terminal, the Portsmouth Marine Terminal was left dormant, except for areas leased to a company exporting wood pellets and to the contractors building a new Downtown Tunnel between Portsmouth-Norfolk. In 2014 that terminal was used to ship 2,500 Chrysler Jeep SUVs to China and then, after an increased number of shipping containers created congestion at the NIT and APM terminals, Portsmouth was re-activated as a container terminal.7
To increase future capacity after the Panama Canal is expanded, there are also plans for constructing the $2 billion+ Craney Island Marine Terminal (CIMT) to double the Port of Virginia capacity to five million TEUs per year. The terminal will be located on new land, created by dumping material that was dredged from the bottom of the Elizabeth River and Hampton Roads in order to deepen and maintain shipping channels. The Craney Island Eastward Expansion Environmental Impact Statement (EIS) was approved in 2006, final permits were issued by the Virginia Department of Environmental Quality in 2010, and construction is underway.
The new terminal is supposed to open in 2020. In 2012 the Corps of Engineers re-analyzed the project, assuming use of the large Suez-class cranes that can stretch across ships loaded 22 containers-wide and stacked six containers high on deck. (The Panama Canal, before widening, has been limited to ships 13 containers wide.) The Corps concluded in 2012 that the benefit-to-cost ratio of the Craney Island Marine Terminal over the next 50 years was better than 6:1, almost double the initial estimates.8
terminals in Hampton Roads include Newport News Marine Terminal (NNMT), Norfolk International Terminal (NIT), Portsmouth Marine Terminal (PMT), APM/Maersk Terminal (APM), and the future Craney Island Marine Terminal (CIMT) (the privately-owned coal terminal at Lamberts Point, used by Norfolk Southern railroad to load coal, is visible between PMT and NIT on the east side of the Elizabeth River)
Source: Port of Virginia, State of the Port (2009)
There are private shipping terminals in Hampton Roads, in addition to the Virginia Port Authority facilities. The CSX railroad carries coal to two privately-owned coal terminals in Newport News (Kinder Morgan's Pier IX, plus a separate coal export terminal owned by Dominion Terminal Associates). The Norfolk Southern railroad exports coal from its large terminal at Lamberts Point in Norfolk.
KinderMorgan, the "largest independent terminal operator in North America," owns the Elizabeth River Terminal (ERT) on the South Branch of the Elizabeth River, upstream (south) of the Portsmouth Marine Terminal. Elizabeth River Terminal handles mostly bulk cargo such as fertilizer, scrap steel, and other commodities. Perdue Agribusiness also has a private terminal on the South Branch of the Elizabeth River, in the City of Chesapeake. Starting in 2011, Perdue began exporting soybeans to China from their Chesapeake terminal, "the only soybean-processing facility on deep water on the East Coast." In 2013, the company agreed to export $100 million of soybeans (two million bushels in each of four shipments in Panamax vessels), and considered expanding to the Portsmouth Marine Terminal (which was under-utilized after container business was shifted to the APM terminal, and dormant until 2014).9
key maritime facilities in Hampton Roads: 1) Newport News Shipbuilding, 2) Newport News Marine Terminal, 3) CSX-serviced coal terminals operated by Dominion Terminal Associates and Kinder Morgan at Pier IX, 4) Norfolk Naval Base, 5) Norfolk International Terminal, 6) site of proposed Craney Island Marine Terminal, 7) APM/Maersk Terminal, 8) Norfolk Southern Lambert's Point docks, 9) Portsmouth Marine Terminal, 10) Norfolk Naval Shipyard, 11) Perdue Agribusiness terminal, 12) Elizabeth River Terminal
Map Source: US Fish and Wildlife Service, Wetlands Mapper
A 2006 economic analysis of the four terminals managed by the Virginia Port Authority documented that 88% of imports arrived in containers, and 12% was roll-on roll-off (RoRo), breakbulk, or bulk cargo. Only 40% of goods imported via those Hampton Roads terminals remained in Virginia for sale to consumers or for processing by Virginia businesses; 60% was carried out of state by truck or rail.10
Deepwater Terminal at the Port of Richmond is nearly 100 miles upstream (by water) from Norfolk. The Port of Richmond identifies itself as the "westernmost commercial maritime port on the North Atlantic coast" with "the quickest access of any port to I-95," but has struggled to maintain commercial traffic.
The Richmond facility has been leased to the Virginia Port Authority since 2011. Port Contractors Inc. (PCI), a private company separate from Virginia International Terminals, began to operate the Richmond port after 2009. The previous operator (Federal Marine Terminals) had not sought renewal of its services contract, after the main customer (Independent Container Line) shifted its business to Wilmington, NC.11
With local, state and Federal grants, the Port of Richmond implemented the "64 Express" in 2008 to carry containers between Richmond and Hampton Roads by barge. The 64 Express expanded to three trips/week in 2012, carrying 80-100 containers per barge between Richmond and the NIT/APM terminals. Creating frequent, reliable service was strongly encouraged by the Virginia Secretary of Transportation, Sean Connaughton, who had recently served as the administrator of the U.S. Maritime Administration.
The 64 Express enabled the Virginia Port Authority to convince Mediterranean Shipping to offer regular service to Richmond. Barging containers up the James River on a "maritime highway" to customers at Hopewell and Richmond removed 12-15,000 truck trips per year from I-64, justifying the $2.3 million grant from the federal Congestion Mitigation and Air Quality program and a $200,000/year subsidy from the state.
In 2012, 4% of the Port of Virginia cargo moved by barge (vs. 32% by rail and 64% by truck). The president of Norfolk Tug Company, which pushes the barges, noted soon after the 64 Express service started:12
The model for Richmond was Virginia Port Authority's "inland port" in Warren County near Front Royal, next to the Norfolk Southern rail line and two interstate highways (I-66 and I-81) in the Shenandoah Valley. It is far inland from the Fall Line, where ship navigation is blocked by rapids. The Virginia Inland Port (VIP) is not even on the banks of the nearby Shenandoah River, which is so shallow that canoes have difficulty navigating its rock ledges.
As noted in one news article, Warren County - west of the Blue Ridge - is not an obvious location for a port:13
The Virginia Inland Port is one of the first intermodal transfer facilities in the United States based on international trade, with containers shipped by rail based on their steamship bill of lading or equivalent - just like a marine container terminal. The inland port was designed so trucks with export cargo from the Shenandoah Valley/Northern Virginia region could transfer containers to rail cars at Front Royal, with a much shorter haul than driving over congested roads to Norfolk. In reverse, containers imported through Norfolk International Terminal (NIT) could be shipped by rail closer to the ultimate destination, then shifted from rail to truck.
Today the Virginia Inland Port is a U.S. Customs-designated port of entry that is over 200 miles closer to the industrial Midwest, and on a highway corridor to the Northeast that is less clogged than Interstate 95. Containers that arrive via ship at Norfolk are lifted by cranes onto railroad cars, then carried by the Norfolk Southern railroad to the Shenandoah Valley.
The railroad can reach the inland port by shipping first to Lynchburg, then going north through either the Piedmont Line (east of the Blue Ridge, crossing the mountains through the Thoroughfare/Manassas gaps via the B-Line) or the Shenandoah Line (using trackage rights on the CSX line crossing the mountains northwest of Lynchburg, where the James River has carved a gap at Balcony Falls, then north to Front Royal).
At the inland port, containers are transferred from rail cars onto the chassis of 18-wheeler trucks for final short-haul delivery (typically to destinations within 50-100 miles). The railroad would like to carry containers all the way to the customer's warehouses, rather than split business with a trucking company. However, in many cases Norfolk Southern does not serve the ultimate destination (so rail cars with stacked containers are transferred to a different railroad), and not all warehouse distribution facilities are located on a rail siding.
The Virginia Inland Port (VIP) was created in 1989, initially as a competitive effort by Virginia to divert trade away from the port at Baltimore. Primary attention was focused on increasing export traffic at Norfolk International Terminal (NIT). Virginia funded creation of the Virginia Inland Port in hopes that companies in western Pennsylvania, West Virginia, and western Maryland (including large poultry operations) would send their containers to a Virginia port rather than to a Maryland port. As described in a feasibility study for creating an inland port in California:14
Virginia could have established the inland port closer to the I-95 corridor, and steered traffic to the Newport News Marine Terminal (NNMT) via its servicing railroad (CSX). However, large parcels of undeveloped land close to the CSX line along the I-95 corridor were relatively expensive. Only Norfolk Southern connected the low-cost land available in the Shenandoah Valley with a port in Hampton Roads, so that railroad became the primary beneficiary of the traffic between Norfolk (NIT) and the inland port.
Front Royal was not the first choice of the rail partner. Norfolk Southern wanted a longer haul by rail, but land was inexpensive and available at the Shenandoah Valley site.
It is not clear how much business shifted from Maryland to Virginia, but the Virginia Inland Port succeeded in attracting sufficient traffic (especially poultry exports) to become the first successful inland port in the United States. Had the planners known how business would grow, they would have acquired 1,000 rather than just 161 acres. Economic development planners would also have ensured zoning for warehouses near the inland port, instead of allowing land across Route 340 to be developed as a golf course.15
The Virginia Inland Port started as a less-congested "satellite marine terminal," using a rail shuttle to bring containers 200 miles closer to customers in Northern Virginia and the Shenandoah Valley. Rail cars loaded with containers were tacked onto the back end of a train already headed to Detroit. The port was not a success initially, with far less than the 40,000 containers/year projected - but after Home Depot built a distribution center in 2003, it doubled traffic by adding 10,000 containers/year. Now that corporations have built large distribution centers nearby, the inland port has morphed into a logistics hub creating 8,000 jobs. Five times each week, freight trains bring cargo from Norfolk International Terminal to the waterless port located west of the Blue Ridge, taking 13 hours to make each trip. 16
North Carolina pioneered the concept of an inland port serving as a strategic rail hub, creating the first one in 1984. Once-a-week unit trains linked the Port of Wilmington to the Charlotte Intermodal Terminal in western North Carolina, near the intersection of I-85 and I-77. North Carolina dropped the use of trains in the early 1990's, before international trade via containers expanded dramatically. The North Carolina State Ports Authority shifted to a "Sprint Service," using trucks instead of rail to move containers quickly to a rail connection at the Piedmont Triad Inland Terminal in Greensboro and the Charlotte Inland Terminal 200 miles inland from Wilmington.17
In 2014 Norfolk Southern built a new intermodal terminal at Charlotte Douglas International Airport, which required building railroad track underneath a runway. Public funding subsidies for that new facility were justified based on predicted growth of transportation-related businesses at the airport, rather than expectations that cargo would be transported from the port at Wilmington to be loaded on planes at Charlotte. At the opening of the facility, its uniqueness was noted by the Norfolk Southern representative:18
Other states are now developing inland ports based on the Virginia model. West Virginia is focused on connecting the port at Baltimore to Martinsburg (in Berkeley County) near the intersection of I-81 and I-70. South Carolina is developing an inland port at Greer near I-26 and I-85. Georgia is constructing its new inland port in the rural area south of Atlanta near I-75.19
State control of the Port of Virginia, eliminating competition between Norfolk/Portsmouth/Newport News, has led to various forms of state support. The Code of Virginia says regarding the Virginia Port Authority:20
In 2012, Governor McDonnell obtained General Assembly endorsement of new incentive programs to spur economic development related to the Port of Virginia. Companies locating within the Port of Virginia Economic and Infrastructure Development Zone, involved in maritime commerce through the port (including warehousing or transporting goods exported and imported through the Port of Virginia) and creating at least 25 new permanent full-time positions, qualify for one-time state grants worth $1,000-$3,000 for each new employee. The boundaries of the special zone include counties/cities near Hampton Roads and the Virginia Inland Port in the Shenandoah Valley - plus Montgomery County.21
Including Montgomery County in the zone may attract international partners to open/expand offices near Virginia Tech, or spur domestic research and development (R&D) spinoff companies to focus on exporting through the port. Pulaski County already hosted the Virginia TradePort - International Port of Entry #1412 and Foreign Trade Zone #238 - at the New River Valley Airport in Dublin, with on-site Customs and Border Protection personnel to streamline the process for collecting import duties.22
State investment in the Port of Virginia is part of an overall plan to stimulate economic activity across the state, not just in the Hampton Roads area, by emphasizing Virginia's advantages for "global logistics." Virginia is centrally located on the East Coast within a day's drive of 40% of the US population, and 55% of the population lives within 750 miles. In contrast to the New York/New Jersey port, there are no bridges limiting height of containers stacked on the post-Panamax ships expected to use the enlarged Panama Canal starting in 2015:23
The Virginia Economic Development Partnership, a state agency, has focused on creating distribution centers to warehouse and transport products moving through the Port of Virginia. Governor McDonnell noted in a 2012 interview how rural areas, far from saltwater, are expected to see a positive return on the state's investment in port facilities:24
Post-Panamax ships will be wider and longer, carrying more containers - and requiring deeper channels
Source: US Department of Transportation "Fast Lane" blog, Expedited review of port projects to speed jobs, economic growth (July 26, 2012)
Most distribution centers are located along all major highways, including sites with no rail access. Backcountry.com, an internet retailer selling sporting goods from its base in Utah, opened its East Coast distribution center in Christiansburg in 2012 so it could ship products quickly, via United Parcel Service, up and down the I-81 corridor.25
Thanks to port and rail connections, new distribution centers are concentrated in Hampton Roads, Richmond, and the northern Shenandoah Valley. The City of Suffolk is the focal point for new distribution centers in Hampton Roads, due to the relatively low cost of land there. Green Mountain Coffee Roasters (which packages imported coffee for single-serve Keurig brewing machines) located there in 2011. In 2013, Lipton Tea expanded its Suffolk operation, which imports tea through the port and produces most of the tea bags sold in the US.26
In 2012, Amazon opened distribution centers in Chesterfield and Dinwiddie counties, with promises to hire over 1,300 people. Business leaders in the Richmond area have identified shipping and distribution as a major regional growth opportunity, starting with expansion of the Port of Richmond into a second inland port, equivalent to the one in Warren County that has resulted in 8 million square feet of storage for 39 companies and creating 8,000 jobs.27
In addition to completing the Virginia Inland Port, Virginia has expanded the road/rail network that transports 60% of goods imported through the Port of Virginia to destinations outside Virginia. One controversial expansion has been proposed construction of a $36 million Roanoke intermodal transfer station in Montgomery County near Roanoke. Norfolk Southern chose a specific site at Elliston near the Roanoke River in 2006, despite strong opposition from Montgomery County that the chosen location was not planned or zoned for industrial use.
The Roanoke intermodal facility was expected to facilitate transfer of containerized cargo from Norfolk Southern railroad to trucks travelling I-81 south into Tennessee and I-77 into West Virginia and North Carolina. In the reverse direction, the terminal was expected to help the Port of Virginia compete with the ports at Wilmington/Charleston/Savannah. At the intermodal transfer station, containers would be taken off trucks that might otherwise drive to Carolina/Georgia ports, and those containers would travel instead on trains to Norfolk/Portsmouth.
The Virginia Department of Rail and Public Transportation committed to paying 70% of the terminal's cost in 2008, if the Norfolk Southern railroad diverts 150,000 containers annually from congested highways (especially I-81). Montgomery County carried its objections all the way to the Supreme Court of Virginia, since Article X Section 10 of the state constitution prohibits funding "internal improvements" except public roads and public parks. (That provision dates back to 1869, after the state nearly bankrupted itself by over-investing in turnpikes, canals, and railroads prior to the Civil War.) A final Supreme Court of Virginia decision in 2011 authorized the state funding, since that same article in the Constitution of Virginia allows "loans to finance industrial development and industrial expansion."28
State officials anticipated that an intermodal terminal would generate local jobs by attracting warehousing and distribution centers, manufacturers and logistics and transportation-related companies. Candidates included parts manufacturers and suppliers to light weight, high quality commodity producers, such as packaged food and furniture. The enhanced transportation capacity would replace the inadequate response provided by economic development officials when companies inquired about the closest location for transferring containers between trucks/trains: "go to Greensboro, North Carolina..."29
The project was delayed by both an economic recession and lawsuits. By 2014 no construction had begun at the Roanoke Intermodal facility, and the railroad was reportedly re-considering the need for the terminal.
The Roanoke Intermodal terminal at Elliston is part of the much-larger Heartland Corridor project. It cut a day off the time required for Norfolk Southern to ship containers from Norfolk to Columbus (Ohio) and Chicago. Norfolk Southern, with state and Federal financial support, altered century-old tunnels to allow trains to carry double-stacked containers through tunnels west of Roanoke and down the New River into West Virginia and Ohio.30
The Commonwealth of Virginia has also helped to finance the Norfolk Southern's rival railroad, CSX. Its National Gateway project, including the Kilby Rail Yard in Suffolk, will also enhance access to Virginia's ports. CSX stopped offering intermodal service to the Newport News Marine Terminal (NNMT) at the end of 1988. Twenty years later the railroad refocused on Hampton Roads, after the APM/Maersk terminal was completed and container operations moved there from the Portsmouth terminal.
Shippers using the APM/Maersk terminal - and the proposed Craney Island terminal - benefit from rail competition. Since 2012, each railroad has been able to build trains at APM/Maersk without the expense of drayage to an off-site rail yard. The Maersk Line shifted its business from Norfolk Southern to CSX in 2012, and started to ship containers to the CSX Intermodal North Baltimore terminal near Toledo, Ohio.31
Virginia's major ports are in competition with New York to Houston - and San Diego to Vancouver on the West Coast. Manufacturers from Asia can deliver goods in a 40-foot or 53-foot shipping container to Los Angeles, load them on a train headed to the East Coast, and truck them to a warehouse or even directly to a retail outlet. Such multi-modal shipping can be faster than the all-water route through the Panama Canal to Norfolk, Portsmouth, or Newport News.
The military presence in Hampton Roads helps spur Federal funding for deepening the shipping channels and improving the local transportation network. Newport News Shipbuilding, the only shipyard designing/building US Navy aircraft carriers and one of two designing/building nuclear submarines, is located on the James River at Newport News.
The Norfolk Naval Shipyard, where some Navy vessels are maintained and repaired, is on the South Branch of the Elizabeth River, where the Gosport Shipyard was first started in 1767. Confusion over the name - the Norfolk Naval Shipyard is within the municipal boundaries of the city of Portsmouth, Virginia - is complicated by the fact that the Portsmouth Naval Shipyard facility is located in Portsmouth, New Hampshire.32
The Norfolk Naval Shipyard played a key role in the Civil War. In April 1861, Virginia military forces seized the shipyard even before voters ratified the Ordinance of Secession. At the Norfolk Naval Shipyard, the Confederate Navy converted the USS Merrimack into the armored CSS Virginia. The Confederate ironclad ship then engaged the USS Monitor in the "Battle of Ironclads" on March 9, 1862.
When shipyard workers added armor plating to cover the wooden deck of the old USS Merrimack, they also increased the weight of the CSS Virginia so it would ride low in the water and protect the unarmored hull. As a result, the CSS Virginia was unable to flee when the Confederates abandoned Norfolk in May, 1862. The ironclad required a 22-foot deep channel, but the natural channel up the James River to the Confederate capital of Richmond was only 18 feet deep, so the Confederate warship was scuttled at burned at Craney Island.33
the Confederate Navy destroyed the CSS Virginia in 1862 when Norfolk was abandoned, because the ironclad required a channel deeper than 18' to steam up the James River to Richmond
Source: 1862 Currier & Ives lithograph from National Oceanographic and Atmospheric Service (NOAA), Monitor National Marine Sanctuary
After World War I, the coal-carrying USS Jupiter was converted into the USS Langley, the first US aircraft carrier, at Norfolk Naval Shipyard. Today, all aircraft carriers are built at a shipyard in Newport News, and the 5 nuclear-powered aircraft carriers in the US Navy Atlantic Fleet are "homeported" at Norfolk Naval Base, which the US Navy advertises as "the largest naval complex in the world."34
After the last conventionally-fueled carrier was retired, the Pentagon considered transferring one aircraft carrier from Norfolk to the retired carrier's homeport, Naval Station Mayport (near Jacksonville, Florida). Upgrading Mayport to deal with nuclear-powered ships would cost $500 million-$1 billion, but would enhance continuity of operations by reducing dependency upon just one facility. In 2012, Virginia politicians foreclosed the potential loss of jobs/economic activity in Hampton Roads by blocking appropriations for any transfer.35
When the Chesapeake Bay Bridge-Tunnel was constructed across the mouth of the Chesapeake Bay in 1994, Virginia adopted a design that accommodated the Navy. The military was concerned that any bridge across the mouth of the Chesapeake Bay could become a barrier to ship traffic, if an enemy (in 1964, that meant the Soviet Union, Cuba or "Red" China) managed to destroy the bridge and it ended up blocking the shipping channel. To ensure that could never happen, the Chesapeake Bay Bridge-Tunnel was constructed as a hybrid. A standard bridge crosses most of the distance between Virginia Beach-Northampton County, but tunnels were dug below the Trimble Shoals and Chesapeake shipping channels. For the same reason, transportation infrastructure crossing the James River below Newport News and the Elizabeth River below the Norfolk Naval Shipyard include tunnels, to ensure shipping channels remain open.36
A potential long-term advantage for Virginia to retain its current naval facilities is that the US military's primary center for logistics education is located now at Fort Lee (near Petersburg), after a Base Realignment and Closure Commission decision to move the headquarters of the U.S. Army Transportation center and equivalent units to Fort Lee. To build on that expertise, and to link manufacturing companies (such as Rolls-Royce's advanced manufacturing facility for jet engines in Prince George County, Virginia) and universities (starting with University of Virginia, Longwood University, Virginia Commonwealth University and Virginia State University), the state created the Commonwealth Center for Advanced Logistics Systems in 2013.37
To support the US Navy and civilian traffic, the US Army Corps of Engineers now maintains a shipping channel from the Atlantic Ocean to terminals in Hampton Roads, and up the James River to Richmond. Virginia claims to have "the deepest natural harbor on the east coast" at Norfolk, but that claim ignores the natural harbor at Eastport, Maine. That town's harbor is deeper at 60+ feet, and the granite bedrock bottom does not require regular dredging. Eastport has an appropriate name. Technically, it is the closest US port to Europe, Africa - and Asia, once ships start to use the Northwest Passage as the ice in the Arctic Ocean disappears. However, Eastport lacks transportation links inland; there is no rail line, and Route 1 is only a 2-lane highway headed south.38
Hampton Roads offers several ports with excellent rail and road connections to inland customers. The 11-mile long Atlantic Ocean Channel is dredged to 52 feet deep from the deep ocean to the Thimble Shoals channel, and is authorized (but not funded) to be dredged to a depth of 60 feet. A 50-foot deep shipping channel is currently maintained to Norfolk and Newport News, by regularly dredging the bottom of the Chesapeake Bay, Elizabeth River, and James River. The inbound channel above the Thimble Shoals tunnel of the Chesapeake Bay Bridge-Tunnel is 350 feet wide and 50 feet deep, while the outbound channel is 650 feet wide and 50 feet deep. Dredging to 55 feet is authorized, but not funded - yet.39
A 1,500 feet wide and 50-foot deep channel is maintained to Norfolk International Terminal (NIT). A narrower 800-foot wide and 50-foot deep channel extends south to Norfolk Southern's piers for coal exports at Lambert's Point. The Elizabeth River is dredged to its southern end, to maintain a 250-foot wide, 35-foot channel to the Atlantic Intracoastal Waterway.40
The 800-foot wide, 50-foot channel to Newport News International Terminal (NNIT) is also authorized (but unfunded) for deepening to 55 feet.41
Since 1957, mud, sand, rocks, shells, and other material scraped up from the bottom ("dredge spoils") has been deposited into one of three cells at the Craney Island Dredged Material Management Area. One cell receives fresh dredge spoils, while two others dry out. After the Corps identified that the Craney Island site would reach capacity in 2025, and the Virginia Port Authority determined its Hampton Roads terminals would reach capacity in 2011, the US Congress authorized expansion of the disposal site eastward into the Elizabeth River and allowing a new marine terminal to be built on the new-formed land created from dredge spoils. (The urgency of the Virginia Port Authority to construct the Craney Island Marine Terminal eased, after the state agency leased the new APM/Maersk terminal in Portsmouth.)42
Norfolk's competitors are not just Savannah, Baltimore, New York/New Jersey, or even the Gulf Coast ports such as New Orleans. Ships can steam across the Pacific Ocean to West Coast ports in 12 days. Containers can be carried from Los Angeles, Seattle, or other West Coast ports by train/truck to East Coast destinations in another 5-8 days. Ships going through the Panama Canal to an East Coast port require 24 days.43
The Norfolk International Terminal has a 50-foot outbound channel now (authorized but not funded for dredging to 55 feet), and has loaded container vessels drawing 49 feet. Norfolk has the deepest channel on the East Coast, so at least one shipping line has designed their port visits to include a "last stop" at Norfolk, topping off the load. Other ports, with shallower channels, could not accommodate a fully-loaded ship.44
Federal funding to deepen shipping channels could enhance or erode Norfolk's advantages. Charleston, South Carolina got Federal funding to deepen its channel from 45' to 50' - but that was not enough for South Carolina. The state agreed to pay 100% of the extra cost required to dredge an extra two feet, so fully-loaded ships could use a 52' deep channel to move at low tides as well as at high tides.45
Savannah, Georgia has a 23-mile channel from ocean to port. When the channel was deepened from 38' to 42' in 1994, the goal was to service ships carrying up to 4,024 TEUs. By 2013, ships calling at Savannah arrived with less than a full load. They could carry up to 8,100 TEUs, if the channel was 48' deep.
Savannah has received Federal approval to deepen the channel from 42 to 47 feet, with 60% funded by the Federal government and 40% by the Georgia Port Authority. All projects to deepen channels require arrangements for dredge spoil disposal, but each port has unique environmental mitigation requirements. Currents in a deeper-dredged Savannah River could result in oxygen-starved zones underwater, so that channel will not be dredged to the full depth of 48 feet as authorized by Congress. Georgia may have to build underwater oxygen bubblers to maintain a minimum level of 4 milligrams of oxygen per liter in the deeper channel.46
Getting Federal support to deepen shipping channels or upgrade on-shore infrastructure (such as rail/road connections) requires lobbyists in Washington, who advocate for staff to include specific language in authorization/appropriation legislation, then encourage Members of Congress to approve funding that benefits a specific port. Representatives of all ports in serious competition for Federal funding must educate Congressional staff and members on the economic potential of port expansion - "if only Federal funding were provided to (insert name of port here), then (insert what good things would happen there)."
Despite a 1994 state law prohibiting Virginia state agencies from hiring lobbyists, in 2013 it was revealed that the Virginia Port Authority was paying for such services. The state agency tasked its engineering contractor to perform advocacy to legislators, paying a 15% surcharge for the engineering contractor to make arrangements with a standard lobbying firm. The Virginia Attorney General concluded the arrangement did not violate state law, because it defined "lobbying" as efforts to influence state officials while the port agency was only trying to influence Federal officials. As the chair of the Virginia Port Authority stated:47
Savannah's channel was deeped in 1994 from 38' to 42' to service ships carrying 4,500 Trailer Equivalent Units (TEU's), but Norfolk is targeting ships with three times that number
Source: Virginia Department of Rail and Public Transportation, Draft 2013 Virginia Statewide Rail Plan (Figure ES-4)
Successful labor relations are essential to maintaining business activity at Virginia's ports. Longshoremen in different East Coast ports united their negotiation efforts in 1916, so the shipping companies could not shift to a different port until a worker's strike was broken. Port workers on the West Coast created a separate union in 1937. Shippers on each coast must negotiate with one union for all ports on that coast, but still retain the option of transferring business when ports on one coast are closed by a strike.48
The major container carriers, terminal operators and port associations for Gulf Coast and East Coast ports have organized as the United States Maritime Alliance. That group negotiates directly with the International Longshoremen’s Association, the AFL-CIO union that represent longshoremen on the East Coast, regarding wages, hours, benefits, and employment guarantees. Every 5 or so years now, workers at Virginia ports who belong to the International Longshoremen’s Association vote to approve or reject the latest "master contract" negotiated with the United States Maritime Alliance.
In 2002, West Coast ports were closed for 10 days while the Pacific Maritime Association and the International Longshore and Warehouse Union (the West Coast equivalents of the United States Maritime Alliance and the International Longshoremen’s Association) negotiated a new master agreement. The expensive disruption of the supply chain caused Asian shippers to diversify their operations, reducing reliance on West Coast ports and expanding service through the Panama Canal to carry containers to East Coast ports. Since 2000, East Coast ports have doubled their share of Asian imports to 30%, despite the extra week or so required to sail the extra distance.49
The ports themselves also have contracts with the union. Maintaining labor agreements at state-owned ports requires some special arrangements in Virginia, a right-to-work state with a long history of opposition to unions. Since the 1950's, the traffic at Virginia's publicly-owned ports has shifted from break-bulk cargo (shipped on pallets) to standardized containers (moved by cranes directly to trucks/rail cars). The shipping terminals in Hampton Roads and Richmond, like others in North America, were once businesses based on labor. Now they are businesses based on equipment.
Operations are far more efficient, after massive investments of capital to modernize cranes, upgrade rail/truck access, and enhance information technology. Containerization has dramatically reduced the need for workers, triggering demands to ensure a continued union role and to mitigate job losses due to automation.
In Virginia, the General Assembly prohibits state agencies from negotiating with unions, so privately-owned service contractor companies operate the publicly-owned ports. Those contractors negotiate with the International Longshoreman’s Association. The Port of Richmond contracts with PCI (a private company), which then negotiates labor agreements with any unions involved in Richmond's port operations. To operate the Hampton Roads terminals and the Virginia Inland Port controlled by the Virginia Port Authority, the General Assembly has created a special corporation called Virginia International Terminals (VIT).
In 2013, after 13 months, the United States Maritime Alliance and the International Longshoremen’s Association agreed to another "master agreement" for East Coast and Gulf Coast ports. Most ports reached agreement at the same time with local unions for local contracts on work rules, but VIT negotiations with the International Longshoremen’s Association regarding 1,650 dockworkers at Norfolk required extended bargaining. The key sticking point involved a requirement in the previous local agreement that VIT pay for three nonworking union members per crane. That provision, upheld in a 2009 arbitration decision, minimized unemployment after new technology streamlined the loading/unloading of vessels docked at Norfolk International Terminal, but the cost made Norfolk less competitive with other East Coast ports.50
State government control of the ports in Hampton Roads and Warren County is exercised through the Virginia Port Authority. The governor appoints 11 people to the authority's board, as well as the State Treasurer who by law is also a member of the Board. Three members must come from Hampton Roads cities- one from Portsmouth or Chesapeake, one from Norfolk or Virginia Beach, and one from Newport News or Hampton.51
VIT, a non-stock, non-profit corporation chartered by the state of Virginia and controlled by the public Virginia Port Authority, is theoretically not a state agency - and thus able to engage in union contract negotiations. The independence of the VIT was reduced in 2013, when the state converted the VIT board into just an advisory body with no decision-making authority. Power shifted to the Virginia Port Authority board, appointed by the governor. In a cost-cutting measure, many of the administrative support functions of VIT and Virginia Port Authority were consolidated. To highlight their concerns that political officials will have too much opportunity to interfere with the business side of port operations, three VIT Board members resigned in protest before the role of that board was revised in 2013.52
In a clear demonstration of that the governor of the state has final authority, Governor McDonnell fired 10 of the 12 members on the Virginia Port Authority board in 2011. The state had rejected serious proposals in 2009 to privatize the port, but the governor and his Secretary of Transportation were concerned that the state-owned ports in Virginia were performing poorly after the 2008 recession compared to the growth of traffic at the ports of New York/New Jersey, Savannah, and Charleston. As noted by the Richmond Times-Dispatch:53
The new Virginia Port Authority board was quickly involved in a complex debate, when APM Terminals proposed in 2012 to privatize the state terminals for 48 years, paying $3.2-$3.9 billion (depending upon port volume during the 48-year period) and ultimately transfer ownership of the new APM/Maersk terminal to the state at the end of that time period). One media source made clear how the nascent economic recovery had altered the business strategy of the private shipping company based in Denmark, headlining its story "APMT wants Portsmouth back."54
After conducting a competitive process through the Public-Private Transportation Act process, other organizations (including VIT itself) considered submitting a bid to operate the ports. In the end, the choices were between APM Terminals and a consortium titled Virginia Port Partners.55
The privatization debate revealed that some state officials thought the ports were financially unstable, even operating at a loss. Privatization would allow a more-efficient company to manage the terminals, generating immediate revenue for the state, reducing annual operating costs, and eliminating the need for future capital investment to upgrade the terminals. Other officials considered the ports to be profitable, with high potential for increased revenues after the economy recovered from the 2009-12 recession and the Panama Canal was widened in 2015.
the Virginia Port Authority predicts its Hampton Roads capacity will grow from 3.5 million to 9.6 million trailer equivalent units (TEU) in 25 years, with a new terminal at Craney Island providing the majority of the growth
Source: Virginia Port Authority, 2040 Master Plan
There was less public discussion over the potential that privatization would provide several billion dollars of immediate funding, which the governor could then steer - with the support of the General Assembly - to implement his transportation agenda or other priorities. The Virginia Port Authority board, all serving at the pleasure of the governor, were forced to make a difficult business decision that would have major political impacts.
The Joint Legislative Audit and Review Commission assessed the competing reports on the costs and revenues of port operations, and concluded:56
In the end, the Virginia Port Authority board decided to maintain state ownership, but consolidate many operations of the authority and its operating arm, Virginia International Terminals (VIT), in order to streamline operations and reduce overhead costs. The board is also planning to use new authority granted by the General Assembly in 2013, allowing the state agency to operate as an industrial development authority and provide grants and low-interest loans to private sector companies planning new distribution facilities.57
In 2014, one reason for Virginia's ability to attract more containers was revealed, after a new governor replaced five members on the board of the Virginia Port Authority. In 2012, during the privatization debate, the VIT board was an independent body separate from the Virginia Port Authority board, and personnel at VIT recognized that sale/lease of the ports could result in job losses.
Incentives for shippers were increased so much that the state's terminals at Norfolk and Portsmouth lost money when they transferred containers to rail cars, paying overtime for the labor to handle the operations. Rather than making more money on more business, the discounts caused the ports to lose more money as traffic increased. The ports lost money when the recession began in 2008, but even after the economy recovered it continued to lose money. The loss in 2013-14 was $17.1 million, more than the $15.5 million deficit in 2012-13.58
Virginia Port Authority terminals have gained market share from competitors since 1982 - but profitability after 2012 was significantly impacted by incentives given to shippers to steer business to Hampton Roads
Source: Joint Legislative and Audit Review Commission, Review of the Virginia Port Authority’s Competitiveness, Funding, and Governance (Figure 6)
The VIT contracts providing the extra incentives were not revealed to the Virginia Port Authority in 2012 or 2013, one reason a former member of the Virginia Port Authority Board has suggested there was a connection between the incentives and the threat to replace VIT through privatization:59
The Virginia Port Authority has developed plans to expand the APM terminal, anticipating sufficient container traffic growth at Hampton Roads to justify adding the capacity to process an additional 1 million TEU's annually to the current 3.5 million TEU capacity. The state is also investing up to $1 billion to expand the dredge spoil facility at Craney Island, designing new cells for sand/muck dredged from the river channel so a future pile-supported wharf can support up to 28 container cranes processing 2.5 million TEU's at full capacity. The state expects to open the Craney Island terminal as early as 2028, two years before the APM terminal lease expires.60
If the Virginia Port Authority transfers its shipping contracts to Craney Island, the owners of the APM terminal could inherit an enlarged facility in 2030 - but then struggle to compete with the state to get contracts to fully utilize the terminal. That possibility incentivized APM to sell its facility to several investment funds in 2014, who renamed it the "Virginia International Gateway."
The new owners may attempt to sell the terminal to the Port of Virginia before the lease expires, or resume ownership in 2028. If the lease expires and the state shifts traffic to the Craney Island terminal, the owners of the Virginia International Gateway will be able to apply whatever lessons were learned for re-utilizing the Portsmouth Marine Terminal.61
The Virginia Port Authority has an alternative strategy to maintaining its lease until 2028: abandon the APM terminal, and default on the 20-year lease. The contract signed under Governor McDonnell commits the state to pay APM roughly $50 million/year. The new governor elected in 2013 described it as "one of the worst lease deals I've ever seen negotiated," and sought to have the deal renegotiated.62
|from a 2004 interview with Edward L. Brown, president of the International Longshoremen’s Association in Hampton Roads, reflecting on changes in shipping since he started on the docks in 1956:63
Since you became a longshoremen, you’ve watched the rise of the container as the primary mode of shipping. How has the switch to containerization affected the union and the workers?
When I first started working all the cargo was handled by hand, piece by piece, and there was very little use of mechanical equipment.
Now we’re fully automated. All of the cargo now is handled by machinery of some kind, highly sophisticated machinery. The productivity goes through the roof now. We’re able to do much more in an hour’s work than we did during those periods.
In the old days, a full gang of better than 20 men making 25 tons an hour was good tonnage. Now they’re doing 2,000 tons an hour with a little better than half the men.
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types of ships that called at Atlantic ports, 2009
("Ro-Ro" stands for "roll-on, roll-off" ships carrying cargo such as Nissan cars to Newport News)
Source: Bureau of Transportation Statistics, Atlantic Coast U.S. Seaports (Figure 3)
two dikes on eastern side of Craney Island will be connected by a third perpendicular dike to create a 200-acre cell, to be filled with dredge spoils and then developed as a new terminal by 2028
Source: Virginia Port Authority/Corps of Engineers, Containment Dikes Break Surface of the Elizabeth River
Port Republic, where the North, Middle, and South rivers merge to form the South Fork of the Shenandoah River, reflects Virginia's dependence on water-based transportation even far inland from ocean-going ports
Source: Library of Congress, Topographic map of the battle-field of Port Republic, Virginia, June 9, 1862
the Norfolk Navy Yard - in Portsmouth, not Norfolk - was destroyed by Federal forces in 1861 and then by Confederate forces evacuating in 1862
Source: Library of Congress, Ruins of the navy yard at Norfolk, Va., December 1864
Jamestown was the first port for ocean-going ships in Virginia
Source: National Park Service, "Jamestown - Sidney King Paintings," Arrival of Lord Delaware