Recent developments at Eastport and Portland punctuate a rocky period at Maine’s deep water ports. Is this wave of activity an indication that our ports are coming back from the recession?
By Kathryn Buxton
In February, Icelandic shipping company Eimskip announced it would move its existing container service hub from Norfolk, Virginia to Portland in order to cut its shipping time to northern Europe. Eimskip estimates it will ship approximately 5,000 containers annually with biweekly service to the port that started in March.
The announcement is a positive sign for the Port of Portland, which has suffered its share of disappointment in the recent past. Since 2007, container service at the port has been a stop-and-go affair. In December 2007, Eimskip suspended operation of its feeder service connecting Portland and Halifax. Less than one year later, in July 2008, Columbia Coastal Transport ceased operations of a weekly container barge operation that connected Portland shippers to points south. For a short while, American Feeder Lines tried to establish service between Boston, Portland and Halifax, but the company, hampered by a lack of private investment and a stubbornly sluggish economy, shut down its container shipping operation in 2012.
Now, with the return of Eimskip, many are hoping that Portland’s port is poised for a boom. Maine Port Authority Director John Henshaw is optimistic about the new service, noting that it is different than other recent container operations at the port. The authority manages Portland’s International Marine Terminal where Eimskip will operate a warehouse and office.
“This is not a feeder service. The difference is Eimskip has its own freight and is using Portland as a logistical hub,” said Henshaw. That means, he said, that Eimskip won’t need to build a new market for its service. The Icelandic transport company is moving its eastern U.S. hub operations to Portland from Norfolk, Virginia, not only to take advantage of shorter sailing times to Europe but also for its connections to land-based transportation including freight rail. Eimskip will link with Pan Am Railways for rail service from the port.
Setting the stage
If Maine’s deep water ports rebound from the recession, it will be in large part due to the efforts of marine transportation advocates who were able to realistically assess Maine’s port assets and prudently invest a limited pool of public funding. In the middle of the economic downturn in 2009, Maine applied for a $34 million TIGER grant (Transportation Investments Generating Economic Recovery) from the U.S. Department of Transportation. The state’s proposal was one of hundreds of applications for a small pool of money – just $1.5 billion in competition with $57 billion worth of projects from all 50 states. Officials consider Maine lucky to have received a $14 million grant that was divvied up between Portland, Searsport and Eastport. Maine was one of only seven port grants during that first round of TIGER funding.
While the original plan had called for more intensive investments, the port authority worked with local officials in Portland to make the greatest impact possible with the limited funding available – $5 million of the TIGER funds set aside for improvements to the city’s port infrastructure.
“We looked at what we could do based on the money we did get, and we made an investment plan,” said Henshaw. The port authority looked at the port’s most glaring barriers – chief among them was a facility that originally had been designed to handle an international ferry and its passengers and which was not particularly well-suited to onloading and offloading freight.
“The container facility was only a sliver of land and the only access was two ramps,” said Henshaw. The decision was to reconfigure the old ferry terminal by reducing the footprint of the building and increasing the area of the pier that interfaces with the terminal by 12,000 square feet, providing direct access to the pier.
A second look
The timing of the renovations proved fortuitous, because the work was coming to completion as Eimskip began planning its move from Norfolk. Larus Isfeld, managing director for Eimskip USA, said that when the shipper originally began to shop around for a new hub, Portland was not high on the list. He said that company officials thought of Portland as cramped and inefficient. When officials invited Eimskip to take a second look, Isfeld was pleasantly surprised.
The old port “was one-third of what it is today,” recounted Isfeld. “What we saw changed that image. What they built in Portland suits us well.”
For Eimskip, that relatively modest $5 million investment made a big difference, as did a concerted charm offensive launched by the city of Portland, the Maine Port Authority and Pan Am Railways, which will provide connecting rail service for Eimskip. Still, the two other ports the company was considering had infrastructure to equal or surpass that found in Portland, including an impressive new crane at the port of Davisville in Rhode Island.
Ultimately, Isfeld said it was a combination of infrastructure and personal connections that helped seal the deal. He credits Pan Am’s David Fink for working behind the scenes to make the deal work for Eimskip, showing how cargo could seamlessly connect with rail service at the port. Fink even flew to Iceland to meet with Eimskip’s CEO, Gylfi Sigfusson.
“Everybody in the state of Maine, local government and business, made us feel like we were welcome, but without the infrastructure nothing else would make sense,” said Isfeld.
For its part, the city of Portland also has heralded the arrival of Eimskip as an example of government and business successfully working together. “A number of different entities had the vision a number of years ago to come together to form this public-private partnership to invest in the infrastructure here and to make sure we had the resources in this area,” Portland Mayor Michael Brennan said in the Bangor Daily News. “So what’s happening today is exactly what we wanted to have happen: to have a major business come to the city of Portland and, all of a sudden, open markets to local businesses, and businesses throughout the state and region, in ways we haven’t had in the past.”
Pellets and cattle
The port of Eastport also struggled in recent years as production at the nearby hardwood pulp plant in Baileyville fluctuated and the plant, then owned by Domtar, shut down for nearly two months during the height of the recession. As a result of that, Eastport Port Authority Executive Director, Chris Gardner, said the goal of recent infrastructure investments and marketing efforts at the port has been to diversify its market base.
“It’s true, we were over leveraged in the pulp and paper industry, but it was and remains a partnership that has been the backbone of the port” said Gardner. “And during the shutdown we certainly hoped and prayed that production at the Baileyville mill would come back to the levels it was at before. But when the mill shut down, we looked around to see what we had. We have our location and proximity to markets in Europe. We have the deepest natural harbor in the continental United states, and we have one of the last places where the forest touches the ocean. And as such, we saw bulk commodities, especially in the fiber business, as an opportunity.”
So Eastport went looking for the funding for $8 million in infrastructure to make the port more competitive. Eastport received $2 million from Maine’s 2010 TIGER grant and an additional $4.5 million from a transportation bond passed by voters in 2009. It also received a $250,000 grant from the Northern Border Regional Commission and secured the remainder of the facility cost – approximately $2 million – through direct investment by the port authority and a bank loan. The port recently completed construction of a bulk handling facility, including a warehouse, conveyor and loading facility that can accommodate large volumes of wood chips and pellets, an increasingly popular fuel source being used in Europe.
That investment has begun to pay off. Last year, the port entered into an agreement with Timber Biofuel Venture to ship woodchips to Europe (Timber Biofuel has not yet begun shipments from the port but it is anticipated for 2013). In February, the port announced that Cate Street Capital plans to build an $80 million wood pellet manufacturing plant at the site of a former chemical plant at the port’s edge. The Port of Eastport has been purchasing the plant and surrounding acreage for $350,000 while former owner BASF has been completing the environmental clean up of the site. At the time the port entered into the purchase agreement with BASF, the hope was to attract a manufacturer to the coast that could take advantage of the port and nearby resources.
As in Portland, Eastport has worked hard to build its port business, not just relying on a “build it and they will come” approach. Gardner has been an outspoken advocate for the port since he came on as port director in 2007. The port also has benefited from support from the region’s state and U.S. legislators, and Gardner is quick to credit Senator Susan Collins, Senator Olympia Snowe and Representative Mike Michaud for their role in securing federal money for port investments. He also noted that former Maine Senate President Kevin Raye was critical in putting together the transportation bond package that went out to voters in 2009 and included funding for marine improvements.
Additionally, Eastport has served as a relay point in the shipment of U.S. bred dairy cattle to Turkey. Since 2010, more than 30,000 dairy cows have been shipped from Eastport, helping to generate a $250,000 port operating surplus for 2012.
The state has also made several targeted investments at Maine’s third deep water port of Searsport during the past several years to improve its marketability, using $7 million from Maine’s first TIGER grant. In February 2012, the Mack Point Marine Intermodal Cargo Terminal took delivery on a $4.2 million mobile harbor crane, Maine’s largest, and has invested nearly $3 million more into cargo handling equipment to expand port capacity and improve efficiency.
Henshaw of the Maine Port Authority noted that, with existing rail service by the Montreal, Maine & Atlantic Railway and recent investments, the port has been able to maintain a steady stream of business throughout the recession due to its ability to handle heavy load cargo such as wind turbine components, transformers and papermaking equipment.
Additionally, area residents have begun to show support for a proposed liquid propane gas terminal that would add a 22.7-million-gallon, 137-foot propane tank to the port’s currently modest 50-foot skyline. Proposed by Denver-based DCP Midstream, the liquid propane gas terminal could add four to six propane tanker trips annually, according to Sprague Energy.
Still, the outcome for the propane terminal remains uncertain as opponents continue to fight it despite broad voter support. In early March 2012, Searsport voters rejected a proposed moratorium on the new development, with voters citing increased revenue from property taxes and the prospect of adding jobs in a county that has seen its unemployment rate double over the past decade. The port there, as in Eastport and Portland, is seen as a good economic development tool.
“We don’t have enough jobs. We’re in economic hard times. We need jobs so our children do not leave here,” Searsport resident Jeff Ryan said in the Bangor Daily News at the time of the vote.
Efforts to market ones of the port’s most promising assets, Sears Island, as a large-scale container port have been sidelined as officials have worked to fill capacity at the port’s Mack Point location. “We do see periodic interest in Sears Island from potential tenants,” said Henshaw, noting that to develop a port facility on the island would require a sizable private investment, and that just has not proven feasible in still tight economic times.
A bright spot for Searsport is a plan by a Cate Street/Thermogen biocoal plant in Millinocket to ship its product to the United Kingdom via Searsport beginning as early as 2014. Still some port advocates have voiced concerns the state and other stakeholders aren’t being as aggressive as they should be in pursuing potential tenants or private partners and instead choosing to “put all of their eggs in one basket,” waiting to see whether or not a propane handling facility will take root at the port. And they express admiration for how Pan Am Railways, the City of Portland – and officials at Eastport – have come together to aggressively pursue and secure business for their ports.
Return on investment
While the economy finally is showing signs of a sustained rebound, shipping in Maine – and worldwide – continues to be on a slow upward trajectory. For containerized traffic, like much of that passing through Maine’s three major ports, “it’s looking like another year of slow growth for imports and exports,” according to marine trade forecasters at the Journal of Commerce. That means funding for additional improvements will likely be limited in the near future.
Case in point is the Marine Highway tug-barge project the Maine Port Authority is developing with a $150,000 federal “marine highway” grant.
The goal is to develop a vessel that would provide container service connecting Boston and Portland with Halifax, Nova Scotia. The Portland-based project is part of a larger “marine highway” concept being developed by the U.S. DOT, and its goal is to eventually connect ports all along the east coast with a cost-effective alternative to overland shipments by truck. Henshaw said the Maine Port Authority has put the project to design the tug-barge hybrid vessel out to bid and expects proposals back within a month. While the scale of the project is modest compared to even the most recent round of port improvements at Portland, Eastport and Searsport, he believes it is just the kind of targeted investment that needs to be made right now and should help promote expansion of Portland’s container operations.
“We need to look at the markets and our resources and try to make investments that make sense,” said Henshaw. “There is plenty of opportunity out there.”