The Long Beach Board of Harbor Commissioners on Tuesday gave final approval to two new incentives for carriers aimed at making the more port more competitive with other West Coast ports from Canada to Mexico and attracting more discretionary cargo while also achieving environmental goals.
The first benefit, effective July 1, is a waiver of dockage fees for vessels that plug into shore power at berth and comply with the voluntary vessel speed reduction program within 40 nautical miles of the port.
On Jan. 1, California began requiring half of container, refrigerated cargo and cruise vessels calling at California ports to hook up to electric power instead of using onboard diesel fuel to run auxiliary systems during their stay, or use an approved alternative that reduces emissions by an equivalent amount. The vessel threshold rises to 70 percent in 2017 and 80 percent by 2020. The California Air Resources Board has allowed for a transition period as ports finish up installing the necessary infrastructure and vessel operators become familiar with new technology on their ships.
Almost 90 percent of vessels arriving at the Port of Long Beach last year slowed down to 12 knots within the 40-mile limit, part of the port's effort to minimize residents' exposure to exhaust with harmful chemicals and particulate matter. The Green Flag program was established in 2005 with a 20-mile range and increased in 2009 to 40 miles. Green Flag participants were awarded $2.9 million dockage incentives.
Port officials are now increasing the amount of the incentive by essentially offering free parking for environmental compliance. During fiscal year 2013, the port's total dockage income from container vessels was about $6.5 million. Assuming 75 percent of vessels subject to CARB rules meet the requirement for the dockage waiver, the port's cost would be about $4.9 million, according to a memo from port staff to the board explaining the proposed resolution. Port officials said the cost of the program could be offset by attracting new cargo. If an additional 250,000 TEU of cargo was routed to Long Beach as a result of the incentive, the incremental revenue to the port from container and other fees could be as much as $20 million.
Dockage charges are calculated based on a vessel's overall length and the period of time it is docked at a terminal. The massive 13,000-TEU, 366-meter-long COSCO Fortune, for example, would save $13,000 for a three-day port call if it met the incentive program's criteria, according to the memo.
Long Beach officials believe the vessel dockage waiver program is the first of its kind in the nation, Noel Hacegaba, the port's acting deputy executive director, said in an interview Tuesday in Washington, where he was scheduled to participate in a logistics industry conference.
The Port of Long Beach has spent $200 million to install shore power stations on its terminals. Shore power can cut source emissions by 95 percent. The Southern California Air Quality Management District is also overseeing, on the port's behalf, a demonstration program to assess the effectiveness of a mobile, barge-mounted emissions control system to capture emissions from a vessel. The technology, developed by Rancho Dominguez, Calif.-based Advanced Cleanup Technology Inc., diverts a docked ship's emissions into an air pollution filter-and-treatment device. The system is nicknamed "sock-on-a-stack" because the large bonnet is lifted by crane on the vessel's smokestack.
The board also voted to adopt an intermodal incentive program to reduce costs for carriers and truck congestion container yards and on city streets. The program would provide a $5-per-TEU ($10 per 40-foot box) cut in container fees for each new loaded container above last year's volume that moved out of the port by rail. Officials estimate that Long Beach would forfeit $3.3 million in revenue if intermodal volume were to grow 20 percent above the 2013 level, but that net revenue from the incremental volume growth would actually be $22.7 million, according to a staff memo on the board's public docket.
The share of import volume moving inland by intermodal rail is 22 percent, up from 19 percent a couple years ago. The port has set a goal of moving 35 percent of containers by on-dock rail in the coming years.
"If cargo isn't set to be transloaded, and it will have a destination outside of our region, then we should do everything we can to ensure that we have full utilization of our on-dock rail," the board's vice chairman, Richard Dines, said during the meeting.
Both incentive programs are scheduled to last two years.
Two years ago, the Long Beach board capped port dockage fees at $8,641 for any ship longer than 345 meters in an effort to induce big ships to service the port and offered a $10 discount per incremental intermodal container. Both programs lasted for one year.
The Port of Los Angeles, for calendar year 2014, implemented a $5-per-TEU discount for each incremental container, either intermodal or truck-based, a carrier ships through the port. The rate jumps to $15 per TEU for all TEU if a carrier's container volume grows by 100,000 TEU above last year's throughput.
Officials at both ports say the incentives are necessary as the ocean carrier industry undergoes fundamental changes to its operating models that dictate changes in route networks and continues to feel economic pressure from overcapacity and high fuel costs.
Edit: A previous version of this story did not clearly state that the test of a large emission filter placed over a vessel's smokestack is moved around the harbor on a barge.