Economics Working Group Summary of White Papers

ECONOMICS WORKING GROUP
*SUMMARY OF WHITE PAPERS*
June 4, 2002
Revised August 14, 2002
Committee attendees:
John Snedeker, Synergistic Dynamics Morgan Rees, Rees Engineering and Environmental Services Ali Rees, Rees Engineering and Environmental Services Larry Keegan, Lockwood Greene Engineering Terry Stratton, USACOE Doug Plachy, USACOE Bill Bailey, USACOE Pete Simons, U.S. Coast Guard Teri Leffek John Shelby, League of Women Voters of Savannah-Chatham	David Kyler, Center for a Sustainable Coast Tom Wright Ted Will, Georgia Department of Natural Resources Patty McIntosh, The Georgia Conservancy Will Berson, The Georgia Conservancy Russell Webb, US Fish & Wildlife Service Chris Graves, US Fish & Wildlife Service John Robinette, US Fish & Wildlife Service Judy Jennings, Georgia Chapter Sierra Club

FLEET PROJECTIONS
a. Assumption: No bulk vessel fleet growth, loading facilities are too constrained EWG: Valid NOTE: One EWG committee member has requested that this topic be revisited. b. Assumption: Container vessel sizes will increase EWG: Valid c. Assumption: Foreign ports will invest in necessary infrastructure EWG: Valid d. Assumption: Sufficient demand exists to fill larger vessels at the same level of frequency of service EWG: Defer any extended discussion of this assumption due to federal budget constraints in light of the events of 9/11/01. It should be revisited when final economic analysis decisions are made. EWG will monitor trends and data as available. e. Assumption: Trends in Savannah fleet will reflect trends in world fleet EWG: The meaning of this statement should be better defined and clarified. f. Assumption: TEU capacity of fleet will equal demand, reflect market equilibrium EWG: Valid, with the clarification that during period of analysis, on average, TEU capacity of fleet will be consistent with demand. g. Assumption: Forecast methodology is same for world fleet and Savannah fleet EWG: Morgan Rees and Ali Rees will compile a comparison of projections for World/Savannah Fleet of 2000 vs. actual World/ Savannah fleet data of 2000. This will establish a level of confidence to either accept or discard projections made in the last study. h. Assumption: Fleet overcapacity will be reduced EWG: Valid in principle i. Assumption: Replacement vessels will be 15% larger than scraped or retired vessels EWG: As decision- making processes progress, updates and/or recalculations of data will be needed to validate this assumption. j. Examine: Larger ships will result in fewer port calls EWG: The information is intrinsic to fleet projection items. CLARIFICATION: Schedules will be evaluated as part of the overall fleet projections. k. Examine: Post-panamax vessel deployment EWG: Further data is needed to examine fleet rotation and deployment. This discussion will be revisited when Savannah Fleet projections are updated. l. Examine: Potential for mega-ships EWG: This will be examined in the Savannah fleet projection update. m. Examine: Methodology from Oakland Feasibility Report is applicable to Savannah EWG: Changes applied only to Asian/Pacific routes. Discussion will continue.

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TRADE PROJECTIONS
a. Assumption: Savannah will retain its regional market share EWG: No objection, but, further data is needed to fully verify and/or defend the statement. b. Assumption: Savannah share of US market will decrease slightly EWG: Invalid, but additional data should be obtained to fully defend the statement. c. Assumption: 6.1% short term growth, 4.8% long-term growth EWG: Agreement, but further data, as it is available, will be needed to fully validate the conclusion. d. Assumption: Local, regional, national, and international economic growth will continue EWG: Valid e. Assumption: Projections in the South Atlantic Ports Study apply EWG: The Study is outdated and understated compared to actual statistics and current projections. f. Assumption: Non-containerized shipments are important to project economics EWG: Valid, but additional data is needed to fully defend the statement. g. Assumption: Industry trend is away from general cargo EWG: Valid h. Assumption: Transition from general to container cargo is moderate in the future EWG: Invalid; transition will probably happen relatively rapidly and steadily, based upon current trends. i. Assumption: Some growth in Asian trade will shift to the Suez Canal EWG: The statement cannot be proven or disproved based on research from leading trade and economic journals. j. Examine: Use of international trade projections based on ICF Kaiser, DRI/McGraw Hill, WEFA, PIERS, South Atlantic Container Study, Corps of Engineers Waterborne Commerce Statistics, Dept. of Energy, Dept. of Commerce projections EWG: Acceptable. Further data will be needed in the future. The Trade Forecast will be updated in FY03/04. k. Examine: Railroad congestion EWG: This point will be adequately addressed within other topics, such as Landside Infrastructure. l. Examine: Railroad mergers EWG: This point will be adequately addressed within other topics, such as Landside Infrastructure. m. Examine: 1996 forecast for 2000 was exceeded in 1998, 592,000 TEU’s forecast vs. 743,000 actual EWG: This is a statement of fact. n. Examine: More specific statements from port customers EWG: If interviews are to be part of the economic analysis, the EWG should participate in formulation of the questions. NOTE: The Corps can only use a standard set of questions previously approved by the Office of Management and Budget. NOTE: The U.S. Maritime Administration advocates one-on-one interviews with customers as one of many elements in determining the "economic soundness" of a new shipping venture. o. Examine: Trade lane changes as a result of larger vessels EWG: This point was inherent in the existing analysis. p. Examine: Emergence of mega-regional distribution centers EWG: This point was inherent in the existing analysis. q. Examine: Trade imbalance EWG: The point can be examined by looking at the status of empty containers. r. Land-side infrastructure capacity EWG:: The point raised additional questions: (a) Does GPA have enough infrastructure to handle forecast growth? (b) How would GPA accommodate future growth?

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MULTIPORT ANALYSIS
a. Assumption: Costs at competing ports are comparable EWG: Cost comparison will be updated. b. Assumption: Competitive position depends on quality and frequency of service EWG: Comparisons will be updated. c. Assumption: Competition factors 1. Other ports A. Charleston B. Freeport C. Norfolk D. Wilmington E. Jacksonville F. West Coast Ports (land bridge) G. Canada (Halifax) EWG: Deferred examination of individual ports 2. Port capacity EWG: Evaluation will be included in multiport analysis. d. Assumption: Competitive hinterland markets do not change EWG: Valid. Accepted the 1998 US Trade/Hinterland market study that showed Savannah hinterland market will not significantly change. e. Assumption: Land distance less than 500 miles is transported by truck EWG: Valid f. Assumption: Land distance greater than 500 miles is transported by rail EWG: Valid g. Assumption: Atlanta and Memphis are good sample destination cities EWG: Valid h. Assumption: All competitive port infrastructure will keep pace with needs EWG: Valid (with additional comments from one member). i. Reexamine: Use of a 4000 TEU vessel for multiport analysis EWG: A 6,000 TEU vessel will be used. EWG: The following White Papers for "Operating Practices", "Base Year,"and "Data Use," were posted to the Harbor Deepening Website and circulated to EWG via email. No additional discussion or comments were received.

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OTHER ECONOMIC PRACTICES
a. Assumption: Economic value of SNWR Comment from USFWS: The statement of valuation of SNWR is vague when considering the entire resource. The ecosystem as a whole should be considered including SNWR when this question is posed.

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OPERATING PRACTICES
a. Assumption: Number of TEU’s projected are adjusted based on existing light loading practices b. Assumption: One-way traffic c. Assumption: Channel transit time is 2.5 hours d. Assumption: Vessels arrive and depart in random distribution e. Examine: Savannah pilots require 4 feet underkeel allowance f. Examine: Beam width restrictions will be more frequent with larger vessels g. Examine: Channel dimension: width, depth h. Examine: Landside/intermodal constraints i. Examine: Tidal delay practices j. Examine: Density of cargo, cube out v. weight out

BASE YEAR
a. Assumption: Base year for projections was designated as 1996 b. Assumption: Base year for construction was designated as 2000. c. Examine: Use fixed year vs. rolling average or least squares for base year.

DATA USE
a. Assumption: Use Corps of Engineers vessel operating costs and route distances. b. Assumption: Changes in Savannah fleet have mirrored changes in the world fleet for period 1986-1996. c. Assumption: Actual fleet growth has exceeded 42-foot channel report predictions d. Assumption: Discount rate is prescribed by law.
OTHER ECONOMIC FACTORS
a. Assumption: Alternate assumptions do not have supporting rationale. b. Assumption: Light loading characteristics remain the same for all classes of vessels, except when the vessel class can operate unconstrained. c. Examine: BAH approach is conservative. d. Examine: Second order impacts. e. Examine: Economic value of SNWR f. Examine: Analyze storm surge damage g. Examine: Practicable alternatives: load center/feeder port concept; land bridge; other transshipment options; fast ship market share; alternative ship operating characteristics, e.g., one-way traffic.

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