1 2 3 4 STAKEHOLDERS EVALUATION GROUP 5 6 MEETING 7 OF 8 FEBRUARY 10, 2009 9 10 11 12 MIGHTY EIGHTH AIR FORCE MUSEUM 13 POOLER, GEORGIA 14 15 16 17 18 19 20 21 22 23 24 25 2 1 2 3 I N D E X 4 5 OPENING REMARKS AND INTRODUCTIONS ------ 3 6 7 SPECIAL TOPIC - OPERATING GUIDELINES --- 8 8 9 ECONOMICS STUDY UPDATE ----------------- 19 10 By Bernard Moseby 11 12 OLD BUSINESS --------------------------- 113 13 14 CERTIFICATE ---------------------------- 120 15 16 17 18 19 20 21 22 23 24 25 3 1 OPENING REMARKS AND INTRODUCTIONS 2 (THE REPORTER: I am appearing here today 3 on behalf of my employer, Tom Crites & 4 Associates. My office was requested by Georgia 5 Ports Authority to provide a court reporter 6 today at 9:00 a.m. at this address. 7 Pursuant to the laws of Georgia, as well 8 as the instructions of my employer, I wish to 9 disclose that, other than accepting to serve as 10 your reporter, we have not entered into any 11 other contractual agreement.) 12 MR. DYSART: Good morning. I am Ben 13 Dysart, the SEG facilitator, and I welcome 14 y'all here. We were talking a little earlier 15 about what constituted a quorum, and resident 16 historian, Bill Farmer here, said the word 17 quorum was not mentioned in the operating 18 guidelines. 19 So I said that we will define it as being 20 those interested enough and motivated to attend 21 will constitute a quorum, so we have indeed a 22 large quorum today. 23 Welcome. It's been a while since we met. 24 We have some interesting things on the agenda 25 today, and let's start off. Which end do you 4 1 OPENING REMARKS AND INTRODUCTIONS 2 want to start on -- start over there with Tom 3 Wright -- 4 MR. WRIGHT: I'm Tom Wright, local 5 citizen. 6 MR. DYSART: -- and introduce -- name and 7 affiliation or affiliations. Okay. 8 MR. WRIGHT: Tom Wright, local citizen. 9 MR. GRIFFIN: David Griffin, Georgia 10 Department of Transportation. 11 MS. DAVY: Kay Davy, NOAA Fisheries. 12 MS. WENDT: Priscilla Wendt, South 13 Carolina DNR. 14 MR. YOUNG: Bill Young, Jasper County 15 Planning Board, retired Corps of Engineers. 16 MR. WOODS: Milton Woods, concerned 17 citizen of Jasper County. 18 MS. MALLOY: Andrea Malloy, Coastal 19 Conservation League, South Carolina. 20 MS. MOORER: Hope Moorer, Georgia Ports 21 Authority. 22 MS. LANDERS: Mary Landers, The Savannah 23 Morning News. 24 MR. WILLIS: Steve Willis, Center for a 25 Sustainable Coast. 5 1 OPENING REMARKS AND INTRODUCTIONS 2 MR. McCURRY: Jamie McCurry, Georgia Ports 3 Authority. 4 MR. SCHALLER: David Schaller, Georgia 5 Ports Authority. 6 MR. REES: Morgan Rees, consultant to 7 Georgia Ports. 8 MS. BEASLEY: Cathy Beasley, Georgia Ports 9 Authority. 10 MR. BERSON: Will Berson, The Georgia 11 Conservancy. 12 MR. HALL: Carl Hall, Georgia Wildlife 13 Federation. 14 MR. BARRETT: Tim Barrett, Georgia DNR 15 Fisheries and fisherman. 16 MS. COLVIN: Elizabeth Colvin, Georgia 17 DNR, Wildlife Resources. 18 MS. GRIESS: Jane Griess, US Fish and 19 Wildlife Service, Savannah Coastal Refuge. 20 MR. EUDALY: Ed Eudaly, consultant, Fish 21 and Wildlife Service. 22 MR. WEBB: Rus Webb, US Fish and Wildlife 23 Service. 24 MR. SKINNER: Ben Skinner, Corps of 25 Engineers. 6 1 OPENING REMARKS AND INTRODUCTIONS 2 MR. BAILEY: Bill Bailey, Corps of 3 Engineers. 4 MR. MOSEBY: Bernard Moseby, Corps of 5 Engineers. 6 MR. WIKOFF: Bill Wikoff, US Fish and 7 Wildlife Service. 8 MS. MOORE: Kelie Moore, Georgia DNR, 9 Coastal Resources Division. 10 MR. PARSONS: Keith Parsons, Georgia DNR, 11 Environmental Protection Division. 12 MR. DYSART: Ben Dysart. 13 MR. FARMER: Bill Farmer, public. 14 MR. OFF: Lou Off, Tybee Island. 15 MR. GADDIS: Gabe Gaddis, Georgia DNR, 16 Coastal Resources Division. 17 MR. DYSART: Okay. We will make sure 18 that we introduce anyone who comes in later on 19 the record. Nice to see Jamie back, haven't 20 seen him for a while. 21 I told Morgan Rees that he was really 22 holding up pretty well. I remembered back when 23 he was young 10 years ago. He said he had been 24 involved in this process longer than that, so 25 that's a -- doubly, I would say he is holding 7 1 OPENING REMARKS AND INTRODUCTIONS 2 up well and looking young and happy and 3 spirited -- 4 MR. REES: How kind you are. 5 MR. DYSART: I also have to sit with Will 6 Berson and keep him in order, and I couldn't 7 find him over there. Apparently he has slipped 8 off in order to be able to act out without my 9 supervision. 10 MR. BERSON: Change of perspective. 11 MR. DYSART: So anyway, I found you, and 12 I'm going to watch you. Okay. The next thing 13 we will do is to look at the agenda for today's 14 meeting. You've had an opportunity to look 15 through it. 16 Are there any additions or changes that 17 you want to make? If not, we will consider 18 this is the agenda we will be operating under 19 today and move on. Seeing no exceptions, we 20 will do that. 21 The next item is your approval or 22 consideration of the last SEG meeting's 23 transcript, which has been made available to 24 you for review. 25 Is there any corrections that need to be 8 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 made or clarifications, let's please mention 3 them now? Seeing none, we will consider that 4 the posted transcript from the July '08 meeting 5 stands approved as posted. 6 Next we have a special topic, and for 7 quite a while we've been talking about the 8 operating guidelines, and trying to get them in 9 line to guide the body, as we hopefully -- as 10 you hopefully move toward completion of your 11 mission. So today, that's the first major item 12 on the agenda. I would invite Will Berson to 13 take over. 14 MR. BERSON: I'm the perfect person to 15 talk about special topics, I'm a special ed 16 guy. This is something we've been working on 17 for a long time. 18 I have to credit Bill Farmer, as well as 19 the Operating Guidelines Committee for taking 20 this on. 21 In essence, what we're trying to do is -- 22 is look at our operating guidelines and make 23 them match how the process has actually worked 24 in practice. In a way, that's kind of 25 revisionist history, but it also reflects the 9 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 fact that when the process started we expected 3 things. 4 We've tried to look at the operating 5 guidelines against past minutes and other 6 things to make sure we are being consistent 7 moving forward, as well as how we have dealt 8 with things in the past. 9 The two folks I want to call on to talk 10 about this, and Hope I'm not going to pick on 11 you actually, but you're welcome to chime in, 12 but Bill Farmer having led this, I'd like you 13 to lead us through the revisions, and Bill 14 Bailey, I'd like for you to just sort of 15 discuss the Corps concerns, if any, and sort 16 of that aspect of it. Anybody else that would 17 like to chime in is welcome to. 18 Priscilla, at one point, I recall that you 19 had asked that we make them available. Has 20 everyone had a chance to look at them, and 21 Hope, do we have a couple copies, some copies? 22 MS. BEASLEY: We have 10 sets of each. 23 MR. BERSON: Okay. So anyone that needs 24 to look at these while we're doing this, we 25 have copies for you that are also available. 10 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 Is there any sort of issue about that? I 3 want to make sure everybody is feeling informed 4 as we talk about this? Okay. Bill. 5 MR. FARMER: Okay. Of course, the 6 operating guidelines fall into the category of 7 a governing document. Any organization has a 8 set of governing documents. Governments have 9 constitutions and laws and statutes and rules 10 and policies, so forth. 11 Corporations have charters and bylaws and 12 rules and policies, so forth. Any organization 13 y'all belong to has some sort of governing 14 document that describes what the organization 15 does, and how it does it, and that sort of 16 thing. 17 And it's relatively important that as a 18 participant in that organization you adhere to 19 your governing documents. Well, it turns out 20 that the operating guidelines is the governing 21 document for this organization. And the 22 document that we have been operating under was 23 established back in 2001. And our operations, 24 since that time, have evolved to be different 25 than what our operating guidelines said back in 11 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 2001. 3 So we feel it's important to update the 4 document to reflect what we actually are doing, 5 what we have done, and what we are most likely 6 to do. 7 To accomplish this, we had two choices. 8 One was to take the old document and to 9 doctor up words here and there, and it turned 10 out that method was not the easiest and the 11 best. 12 The easiest and the best was to draft a 13 new document, which established guidelines one, 14 two, three, four, five, and that sort of thing, 15 and that was done. 16 It was reviewed, by the Operating 17 Guidelines Committee, over several meetings and 18 polished and made to be accurate as possible, 19 and that's the document that was put on the 20 website and distributed to y'all for review. 21 And that's where we are today, to adopt 22 this document which would basically describe 23 what we're doing and how we're doing it. That 24 has certain benefits. First of all, it will 25 transform this organization to one that 12 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 actually performs in accordance with its 3 governing documents which is a good thing. 4 And secondly, future use of this document 5 as guidance for other organizations, such as 6 the Jasper people, they may want an operating 7 guidelines for that effort, and they might want 8 to use ours as a model to begin with, and it 9 would be good to give them a document that is 10 accurate, comprehensive, effective and so 11 forth. 12 So the whys and wherefores are fairly 13 obviously. We want to behave as we're supposed 14 to, and we want the future to benefit from our 15 experiences. 16 So there we are. If we want to have 17 additional improvements here, that would be a 18 good discussion point. 19 If anyone is unclear as to why and how we 20 got to the point where we are, we can go 21 further into more discussion, but that would be 22 the brief overview of where we are. 23 MR. DYSART: Let me ask you, Bill, could 24 you briefly give a few bullet points of sort of 25 the major features in this, just very quickly? 13 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 MR. FARMER: Okay. Very good. The 3 initial guidelines indicated that our advice to 4 the Georgia Ports Authority would be in the 5 form of consensus decisions. 6 And it turns out that has certain 7 difficulties in that often the participants 8 would not all be here, so that their input was 9 basically not accepted, not given. And 10 therefore, you know, was that really a 11 consensus or not. 12 Secondly, the guidelines indicated that 13 our group here should establish what studies 14 would be needed, and then the Corps and Ports 15 Authority would go off and do these studies. 16 Then the studies would come back to this 17 organization, and we would basically make a 18 consensus decision as to whether the studies 19 were good or bad or complete or incomplete or 20 whatever. 21 And it turned out as a group we really did 22 not want to do that. We wanted the studies to 23 stand on their own merits without a judgment by 24 the group. 25 And thirdly, the kinds of advice we were 14 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 to give were again to be by consensus, but 3 through time the advice that actually was given 4 was individual members giving advice. So we 5 needed to change the definition of what 6 constitutes advice. 7 And it turns out that almost everything we 8 do now, as documented here, can be considered 9 advice to the GPA, whether it's consensus, 10 opinions, or whether it's reports that 11 committees have been watching, or whether it's 12 individual outbursts in the meeting. 13 That's all now considered acceptable 14 advice to the GPA, whereas the initial 15 documents did not say it was. So I guess that 16 would be the highlights. 17 MR. BERSON: The other sort of element 18 that had changed since we first drafted these 19 was that the project moved from being under 20 GPA's control to the Corps, through a 21 memorandum of agreement between the agencies. 22 So it's important that this document 23 reflect that our advice is to GPA, and that GPA 24 will then work with the Corps to see that our 25 advice is at least heard. And so the direct 15 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 sort of line of however we were giving -- I 3 love outburst, I think I'm probably the one 4 outbursting in meetings. 5 But anyway, how ever our advice was being 6 transmitted, in effect it was going to GPA. It 7 was important these guidelines sort of reflect 8 that. 9 Bill, I think I sort of covered the main 10 issue for you. If there was anything else you 11 wanted to add? 12 MR. BAILEY: No, that's okay. 13 MR. BERSON: At this point, I'd like to 14 open the floor to anybody that has a concern or 15 wants to discuss this. I think the next -- the 16 next request we have is that we adopt these 17 formally as the SEG -- in consensus or outburst 18 or acclamation, how ever it is that you want to 19 do this. 20 So I guess discussion is the first thing; 21 does anyone have any concerns, any points that 22 they want to bring up? 23 Well, you might have noticed as Bill was 24 talking in the past tense, was done, that sort 25 of thing, was done was done by Bill Farmer. I 16 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 want to make sure we recognize his efforts, 3 because I promise you we would still be working 4 on this if it weren't for Bill. I think we 5 need to recognize and thank him very much for 6 his efforts -- 7 MR. FARMER: I think a round of applause 8 would be appropriate. 9 (Applause) 10 MR. BERSON: Wait, I'm going to now 11 entertain a motion to adopt these. 12 MR. WRIGHT: So move. 13 MR. BERSON: Second? 14 MS. WENDT: Second. 15 MR. BERSON: All right. Any discussion? 16 All in favor -- 17 MS. MOORER: Is there a consensus? 18 MR. BERSON: Is there a consensus? 19 MR. DYSART: Seeing no objections, I will 20 declare a nice consensus. 21 MR. BERSON: Outbursts are in order. 22 (Applause) 23 MR. DYSART: Bill, thank you very much 24 again. 25 MR. FARMER: You're welcome. 17 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 MR. BERSON: I appreciate it. 3 MR. DYSART: We had another member join. 4 Would you like to introduce yourself on the 5 record. 6 MR. KYLER: David Kyler, Center for a 7 Sustainable Coast. 8 MR. DYSART: Interesting. Bill has not 9 been an outburst person in the past. He has 10 had wise musings which do not constitute 11 outburst, and David Kyler has a source of 12 wisdom and thoughtful input. 13 I will note for those who have a lot 14 history here, we have had a lot of outbursts 15 here. The wisdom and the musings and the 16 deliberating and working through things is far 17 preferable. 18 I think I have long appreciated Bill 19 Farmer. I think, to some extent, he has been a 20 part of the conscience of this organization by 21 saying things don't quite fit. You know, let's 22 get it. 23 And I guess his notion of the guidelines, 24 getting them to where they conform to reality, 25 you're comfortable with what you're doing, you 18 1 SPECIAL TOPIC - OPERATING GUIDELINES 2 know, then let's get them fixed. 3 I ran into a chief of police one time who 4 was telling somebody, he said, you know, you do 5 what you need to do. He was at an insecure 6 location. He said, you do what you need to do. 7 When we get there, we'll make it right on 8 paper. 9 So Bill has helped people make this right 10 on paper, and I think that is something that 11 will be helpful as the body goes forward in 12 completing its responsibilities. I think we 13 all do appreciate -- 14 MR. FARMER: Thank you. 15 MR. DYSART: -- You're being this 16 conscience on this matter. This feels good, as 17 far as having things conform. Okay. Well, 18 Will, you did a good job of taking what could 19 have been a long thing and making everybody 20 smile and moving right along. 21 Okay. Scientific briefings, how about the 22 Economics Study Update, Bernard? 23 MR. MOSEBY: Yes, sir. 24 MR. DYSART: Are you going to be 25 presenting this, or are you just telling -- 19 1 ECONOMICS STUDY UPDATE 2 telling somebody that they need to go do it for 3 you? 4 MR. MOSEBY: No, I don't have any 5 underlings as of this time -- glorious work for 6 me. 7 MR. DYSART: It's always good to hear from 8 somebody who actually knows what they're doing 9 and did it themselves. 10 MR. MOSEBY: Thank you. I hope I live up 11 to your expectations. 12 MR. DYSART: Okay. 13 MR. MOSEBY: I'll tell you, it scares the 14 Be-Jesus out of me with a court reporter here. 15 I've got to watch my jokes, but I've got 32 16 years of service. 17 While I'm getting over the technical 18 difficulties, my brother-in-law is now the 19 Attorney General of the United States, so I got 20 a get out-of-jail free card. 21 MR. DYSART: Make sure you have plenty of 22 fun getting in jail. 23 MR. MOSEBY: Usually, I do. It's for good 24 reason. Can we dim the lights just a little 25 bit in front? It looks kind of small. 20 1 ECONOMICS STUDY UPDATE 2 MR. DYSART: Is that enough? 3 MR. SCHALLER: We can make that bigger, 4 I mean the whole projection. Move it up just a 5 tad. 6 MR. MOSEBY: Very good. Thank you. 7 Again, I'm Bernard Moseby. I'm from the Mobile 8 Savannah District Regional Planning Team. I'm 9 the Chief of Economic Analysis, and also serve 10 as Deputy Director of Deep Draft Navigation 11 Planning Center of Expertise for the Corps of 12 Engineers. 13 And as I understand it, my purpose for 14 this briefing was to present and explain the 15 economic scope of work, to present and explain 16 the Corps approach to its economic evaluation, 17 and to explain the open comments and what is 18 being done to address those comments. 19 In thinking about that for a while, I 20 tried to conceive of where I should start, and 21 with Hope's guidance, I think that you know a 22 lot about our planning processes, and we've 23 been briefed on the history of this study as it 24 has gone on, while Morgan Rees was maturing. 25 So I think I'll start with the alternative 21 1 ECONOMICS STUDY UPDATE 2 formulation briefing that was held here in 3 Savannah back in August. When we went to the 4 meeting, the economist presented the tentative 5 recommended plan, and that plan as outlined 6 involved the deepening, widening, expansion of 7 the turning basin at Kings Island, and dredge 8 material confinement area to isolate cadmium 9 enriched sediments and large mitigation plan. 10 Once again, the formulation briefing was 11 held here in Savannah on the 26th through the 12 28th of August. During that briefly, the 13 Office of Water Projects Review, which is our 14 headquarters branch that does policy review on 15 our studies that are decision documents for 16 Corps -- for the Chief of Engineers to approve 17 and pass on to Congress for funding. 18 It became clear, during our alternative 19 formulation briefing, that the economic 20 comments needed further discussion and 21 elaboration. So what do we do? 22 If we had held the discussions there at 23 the alternative formulation briefing, in front 24 of the very large crowd that was there, we 25 wouldn't -- we would not have had time to 22 1 ECONOMICS STUDY UPDATE 2 attend to the items that we needed to attend to 3 during the alternative formulation briefing. 4 So the economists were ordered to take a time 5 out and get together and hold discussions 6 addressing the comments that were offered by 7 the Office of Water Projects Review. 8 And if you can get two economists to 9 agree, I'd like to find them and how much you 10 paid them to get agreement. 11 But really worked at trying to answer the 12 comments that were offered by the Office of 13 Water Projects Review, and we could not come to 14 a mutual agreement based on the evidence that 15 we presented in our economic studies. 16 So we decided to agree to disagree, but we 17 did have a plan of action. And the plan of 18 action was to have a post-alternative 19 formulation briefing, economic issue resolution 20 conference in Mobile, Alabama. 21 So we got our top economists from the 22 Institute of Water Resources, which included 23 the top economists for the Corps of Engineers, 24 Dr. Dave Moser, and our best deep draft 25 specialist, Mr. E.M. Mathis of the Institute of 23 1 ECONOMICS STUDY UPDATE 2 Water Resources, all of the heads of the Deep 3 Draft Navigation Planning Center together down 4 in Mobile, and we had representation from 5 headquarters, and even from the Georgia Port 6 Authority on the first day. 7 We had representatives who were there to 8 give us port operational information that we 9 needed during the IRC discussions. 10 Economic concerns that were identified 11 during the issue resolution conference; the 12 Savannah Harbor economic model that was 13 developed six years ago did not have 14 flexibility to adjust key variables that would 15 reflect current day operations and changes in 16 the container shipping industry. 17 Simplified assumptions, contained in the 18 economic analysis, relating to the Panama Canal 19 expansion are insufficient in reflecting the 20 canal's potential impacts to container 21 shipping. 22 The industry is rapidly evolving. At this 23 current time, you know, container shipping 24 started in Mobile, Alabama. Many, many years 25 ago, Waterman Shipping Company -- I wish I 24 1 ECONOMICS STUDY UPDATE 2 could remember the date that Waterman first 3 started experimenting with containers. Can you 4 remember, Morgan? 5 MR. REES: No. It was before my time. 6 MR. MOSEBY: But I remember that when I 7 was much younger, and a lot of people were 8 laughing at the idea. All right. 9 Specifically, how empty container and unused 10 container slots on vessels affect vessel draft 11 and loading practices, and this is very key 12 because our economic analysis focuses on drafts 13 of vessels that are using Savannah Harbor, and 14 how they change their operating procedures at 15 each increment of depth improvement, and 16 measuring the economic impact to the nation, 17 basically transportation cost savings for each 18 alternative that we considered. 19 Additionally, our vessels use of the tide 20 in Savannah Harbor must be more integrated into 21 the economic analysis. We did a sidebar 22 analysis in the AFB document that we had 23 presented, and it was not flawed. 24 It did not give us an opportunity to take 25 into consideration the total tide cycle and to 25 1 ECONOMICS STUDY UPDATE 2 do some sensitivity analysis to incorporate 3 risk and uncertainty in our evaluation. 4 The model forecast was involved in 2003, 5 and that's almost ancient history. Where were 6 you in 2003? I don't know. Recent trends 7 indicate a more robust growth in container 8 traffic coming directly to the East Coast and 9 specifically to Savannah Harbor, which is 10 growing at a faster rate than other East Coast 11 ports. 12 We've seen double digit growth, as you 13 already know. All right. The current forecast 14 does not accurately represent Savannah Harbor 15 Southeast Atlantic Region marketshare. 16 Accordingly, this marketshare needs to be 17 adjusted to reflect recent trends, and 18 ultimately reforecast container growth. 19 These five points were the synopsis of 20 what came out of the issue resolution 21 conference that we held in Mobile. So given 22 that, the path forward, here's what we propose 23 to do; to build a model that incorporates 24 flexibility to address through a series of 25 spreadsheets, developed and coordinated with 26 1 ECONOMICS STUDY UPDATE 2 Corps container industry experts at the 3 Institute of Water Resources. 4 These spreadsheets will enable the 5 evaluation of risk and uncertainty through 6 sensitivity analysis of key variables. The 7 spreadsheets will also incorporate tide delay 8 benefits into the mainline benefits analysis. 9 Vessel loadings will be reevaluated by 10 updating container weight assumptions. The 11 revised analysis will reflect -- will evaluate 12 project assumptions related to tonnage and 13 loading practices and transitions from smaller 14 inefficient vessels to more diverse efficient 15 vessels over time. 16 Let me check and make sure this is okay. 17 Okay. Let's hold it here just a little bit. 18 Traditionally, when the Corps does deep draft 19 studies, we've looked at tankers that carry 20 liquid products, and we look at bulkers that 21 carry bulk products. Basically, it's a tub 22 with an engine on it. And you're moving this 23 bulk liquid or bulk cargo from point A to point 24 B and maybe point C or D. 25 Our traditional analysis, if I were to 27 1 ECONOMICS STUDY UPDATE 2 deepen a harbor one foot, and you're moving 3 coal or you're moving oil, or you're moving 4 chemicals, and you have additional capacity on 5 that bulk carrier, if I give you an inch more 6 depth, and you can load on an inch more cargo, 7 that's profit in your pocket, right? 8 I mean the little additional expenses for 9 few to move it around, but if you have got your 10 fixed costs covered, and it's just variable 11 cost to move that extra tonnage around, we're 12 in the money. 13 One foot, two feet, you load until you 14 reach plimsoll line, your design draft, because 15 the more you move once on that trip you're just 16 paying your variable costs basically, because 17 your fixed costs are there all the time. So 18 that's an easy evaluation, and we know how to 19 do that. 20 Containers are a little more problematic. 21 It's like voodoo economics that I used to 22 practice when Reagan was in. 23 Imagine this. I'm running ships from the 24 Far East to America, and we are carrying goods 25 that are less costly, due to a lower labor 28 1 ECONOMICS STUDY UPDATE 2 content when it is produced overseas than 3 produced over here in America. 4 Now, I'm going to run a schedule service 5 like a bus service or an airline, and on 6 certain days I'm going to show up to pick up 7 whatever demand is at the airport, at the bus 8 station. But I've got a long trip to make and 9 I've got a low vehicle. 10 So let's say if I run a weekly pick-up at 11 Savannah Harbor, it takes me eight ships in 12 order to meet that schedule. Well, I've got to 13 look at the demand there at Savannah on average 14 to decide which size ships I should put on that 15 route. 16 And I probably make an economic decision 17 as to what size ships I put on that model. 18 That would serve that particular demand at 19 Savannah and maybe other ports, based on, you 20 know, probably a service level. Like I want to 21 service 95% of the demand, you know, on this 22 route at these ports, or maybe 90%, or maybe I 23 want to service all of it, so I need larger 24 ships. 25 But all those decisions are made. But if 29 1 ECONOMICS STUDY UPDATE 2 you take a look through time as I've got these 3 eight ships running, because I've got to be 4 there every week with another ship to make a 5 pick-up to keep my customers happy so they can 6 depend on me. 7 Sometimes that ship comes in this deep, 8 sometimes it comes in that deep. It varies. 9 Now, let's divide up the load that's on that 10 container ship. 11 There's stuff on that ship that is riding 12 and will stay on that ship, when it comes into 13 Savannah and when it exits Savannah, you know, 14 because it's for other places. So there's 15 stuff that's on the ship that's going to stay 16 on the ship. 17 When it comes in, the ship is probably 18 going to drop off containers or load containers 19 or maybe just pick up empties, when it comes to 20 Savannah. 21 So we have a lot of variability into 22 trying to characterize the operation of these 23 container ships when they come here. They 24 don't come in fully loaded all the time. 25 Sometimes they're light-loaded by one foot. 30 1 ECONOMICS STUDY UPDATE 2 If they're design draft, it's 43 feet. 3 Sometimes they come in at 42. That's one foot 4 light-loaded.. I mean that was just the demand. 5 The containers it had on there, the 6 containers it might drop off, you know, that's 7 coming in. But guess what? When it drops off, 8 it takes on, and then it's got a different 9 draft going out. 10 But I've got to evaluate a particular 11 depth. If we have got 42 feet now, and I want 12 to look at the economics of deepening the 13 channel by one foot, how do I do that? 14 Well, the best way to do is with what we 15 call Monte Carlo simulation model, and the 16 Corps has really invested a lot of effort and 17 time into these Monte Carlo simulation models, 18 because you can model things as they vary, 19 especially like we have in this case with 20 containers here at Savannah. 21 Monte Carlo, you know, it kind of brings 22 up gambling in your mind. Basically, it's 23 gaming, you know, and it has to deal with 24 probabilities. 25 And that's what helps us kind of simulate 31 1 ECONOMICS STUDY UPDATE 2 things, if we have these probabilities we can 3 build them into the model. But it takes time 4 and resources to build models like that. The 5 way the government is funded to do things like 6 that is problematic also. 7 So, here's what we propose to do; use a 8 staff spreadsheet model that is not as good as 9 a simulation model, but it would be good enough 10 to do a point estimate of kind of average 11 conditions. 12 And if you use that same philosophy in the 13 future without project, no deepening and with 14 the with project, a deepening alternative one 15 foot, two foot, here you go again making some 16 assumptions, hopefully not gross assumptions, 17 because what we did in the documentation that 18 we had for the AFB, we made growth assumptions. 19 We didn't have a simulation model. We didn't 20 have a spreadsheet model that was flexible 21 enough to deal with this variation and 22 operational procedure that these container 23 ships had. 24 Container ships have loaded boxes, empty 25 boxes, and they have empty slots. You know, 32 1 ECONOMICS STUDY UPDATE 2 there are slots on the boat that are not 3 filled. 4 These ships are singular. They're like 5 egg crates, you know, you've got slots to put 6 these boxes in. And trying to track that and 7 characterize it, you got to do a lot of 8 homework, and you got to be able to manipulate 9 a lot of data, and really understand what your 10 data is and how you're using it in order to do 11 a relatively good enough job to characterize 12 the way they operate now. 13 It wasn't -- it wasn't the sin wasn't with 14 the model that we had that we used for the AFB. 15 The sin wasn't that we made these growth 16 assumptions, because we floated those 17 assumptions up. 18 And we asked people. We said look, we're 19 making these growth assumptions, but here's the 20 best we can do with the technology that we have 21 today. 22 We don't have a model that simulates the 23 way that container ships are behaving, you 24 know. Other districts had done economic 25 analysis using those same assumptions and they 33 1 ECONOMICS STUDY UPDATE 2 were approved. 3 But on the way, while Savannah was being 4 analyzed, the Corps got in trouble. And you 5 might have read about us in the Washington Post 6 with the Upper Miss study. The guy that headed 7 that up was a guy named Dr. Sweeney, and as an 8 operations research analyst and a modeler then, 9 I worked on Dr. Sweeney's support team where we 10 modeled the whole inland waterway for the 11 United States. 12 And we were supposed to provide answers to 13 the Inland Waterway Users Board how to 14 prioritize monetary investments on our inland 15 waterways, so that everybody got a -- would 16 feel that they input. You know, scarcity of 17 funds, you have to share them. 18 I got a lot of experience with simulation 19 models working with Dr. Sweeney. So Savannah 20 Harbor was coming along, and everybody still 21 bought into the assumptions and then Katrina 22 happened, all right, and we had to respond. We 23 had to respond. 24 The Corps says okay. We are going to 25 clean up our act, and we are going to do a 34 1 ECONOMICS STUDY UPDATE 2 better job with our economic analysis, and we 3 are going to up the standards of our review, 4 because we can't stand this anymore. 5 We can't stand going forward with these 6 assumptions, and doing the best job we can with 7 what we have given the resources that we have. 8 All right. And Savannah got caught in the 9 middle. Boston Harbor got caught in the 10 middle. 11 We set up the Office of Water Projects 12 Review in Washington, D.C. that's going to hold 13 your feet to the fire. And if it doesn't look 14 like, doesn't walk like, doesn't smell like 15 actual environmental, economic, engineering, 16 real world stuff; we're going to send it back 17 to you until you get it right. 18 Long story short, here we are. Okay. I 19 had to digress and show you the skeletons 20 because it's the truth, okay, and it's 21 unfortunate but we learned. 22 The government now is going to find money 23 for us so we can get this deepening model, 24 simulation model, so that we can evaluate 25 projects, container operations on deep draft 35 1 ECONOMICS STUDY UPDATE 2 projects using the right tool. 3 This spreadsheet model that's going to 4 have some risk and uncertainty built into it, 5 it's going to be flexible. It's data driven. 6 It is driven by actual data that we have 7 collected, that Georgia Port Authority has 8 worked its finger to the bone getting for us. 9 The economic team has been working all 10 hours, day and night and weekends, to get this 11 thing back on track and minimize the amount of 12 time that it's going to take to do that. 13 Headquarters sends us PGM, planning 14 guidance memorandum, instructing us what the 15 problems are, and asked us for responses as to 16 how we're going to address those problems. 17 If they're satisfactory, after some back and 18 forth, then they issue this guidance, and 19 that's our road map to go forward to get an 20 approved draft report that we can release to 21 the public. 22 That's where we are now. All right. 23 Satisfactorily complete the Washington level 24 review, revised analysis should be coordinated 25 with headquarters at key progress review 36 1 ECONOMICS STUDY UPDATE 2 checkpoints, and the draft report must address 3 these outstanding concerns in these areas. 4 Here's the charge; from the PGM we -- we 5 were told that in the earlier report we had the 6 base year of 2003, so when we updated it in 7 Mobile, we used the base year 2007. Rather 8 than relying on one peak year tonnage level, 9 the base year should reflect an average of 10 recently observed tonnage levels. 11 All right. What we've done is to develop 12 a new base year or modified base year for 2007 13 that we're going to jump off and forecast from. 14 The complete 2008 data was not available 15 yet, so we took '05, '06 and '07. And 16 forecasters, our credo is that the near future 17 is going to resemble more the most recent past. 18 The near future, tomorrow, is going look 19 very much like yesterday, but as you go further 20 back into yesterday, and you go out further out 21 into the future, things are going to differ a 22 lot. 23 Okay. You're going to have more error 24 then. So what we decided was to use a weighted 25 average. That is, we would put more emphasis 37 1 ECONOMICS STUDY UPDATE 2 on recent observations and less emphasis on 3 older observations. 4 So we took '05, '06 and '07; '07 is the 5 most recent, so we gave it a 50% weight, '06 a 6 30% weight, and '05 a 20% weight. Those 7 weights give you 100%. 8 So instead of jumping off from 2007, and 9 you know what happened in 2008, what we did was 10 to use a three year weighted average in order 11 to deal with things out there in the future. 12 If you jump off from a high point when 13 things are really good, everybody's happy, but 14 you're going to have constituents that are not 15 happy, because you're picking you a nice 16 forecast because things were great. 17 If things were down here, you wouldn't 18 want to forecast from that, would you? So you 19 have to come with a compromise, and we 20 evaluated quite a few forecasting techniques. 21 We found that that would probably be the 22 simplest, easiest to understand, and follows 23 what the Corps usually does in previous studies 24 that we've done, be they deep draft navigation 25 studies or not. 38 1 ECONOMICS STUDY UPDATE 2 We do it in inland navigation studies. 3 We have coordinated this with the Office of 4 Water Projects Review and these checkpoints, 5 and they have bought into that. 6 Now, the stuff that's already on the boat 7 is a problem. We know historically how much 8 was dropped off at Savannah. We know 9 historically how much was put on the boat at 10 Savannah. 11 We know how deep the boat was drafting 12 when it came in. We know how deep the boat was 13 drafting went it went out. We know the loaded. 14 We know the empties. We know how many slots 15 are on the boat, so a little arithmetic, we can 16 calculate the number of empty slots. 17 We've got data and data and data. We know 18 just about everything you want to know about 19 those ships, thanks to the pilot's records. 20 Every time a pilot gets on the ship, you know, 21 stuff is being measured. 22 We know that ship's name, its number. We 23 can go to the book. We know its deadweight 24 tonnage, net tonnage, design draft -- anything 25 you want to quire about that particular boat. 39 1 ECONOMICS STUDY UPDATE 2 But what's on the boat? We have to back 3 into that. If we know how much is dropped off, 4 how much is put on, if we have a good read on 5 how much bumper is on the boat, how much of 6 that boat's buoyancy, crew quarters, engines, 7 machinery or -- all this good stuff -- we've 8 got that. 9 If we can estimate all of that, the only 10 thing we don't know is what was on the boat 11 that's staying on the boat when it comes in and 12 out. 13 Our WR, who does our vessel operating 14 cost, they tell us at sea how much an hour that 15 boat is operating. When it is at a speed that 16 it's coming in and out of the channel, they 17 give us the operating cost. 18 When it is at dock, and you know it's just 19 running off shore power, generators, what have 20 you, how much an hour it costs to operate that 21 boat. 22 So with all of these costs and all of 23 these ideas about how much bunkerage, ballast, 24 things like that that are on the boat; we can 25 back into, based on how much water it's 40 1 ECONOMICS STUDY UPDATE 2 drawing, how much stuff stays on the boat when 3 it comes in and comes out. 4 Now we've got a good picture. Like I say, 5 the picture varies by each ship that comes in 6 and each ship that goes out. So this new 7 Global Insight forecast that we have, circa May 8 2005 gave us forecast for East Coast tonnage 9 and Savannah Harbor in particular. 10 So we can take a look at what's going on 11 at other East Coast ports, when this vessel 12 makes stops at other ports, because we have an 13 idea of the East Coast forecast. 14 MS. MOORER: Bernard, can you tell 15 everybody what Global Insight is? 16 MR. MOSEBY: Oh, I'm sorry. Global 17 Insight is a private forecasting service for 18 profit. Global Insight is very respected in 19 their business that they do, and they forecast 20 world trade from country to country for 21 containers is what we got down from Global 22 Insight. 23 What they gave us was from Timbuktu to 24 Savannah we forecast so many times. This was a 25 large database to get our arms around. We 41 1 ECONOMICS STUDY UPDATE 2 had to take those origin destinations and match 3 them up with these services that we have coming 4 into Savannah, and apportioning that forecast 5 to the different services that serve Savannah. 6 All right. That forecast is May 2008. 7 June 2008 it's old. June 2009, it's even 8 older, but you got put a stake in the sand 9 somewhere, and nail that base forecast date 10 that you are going to project to out in the 11 future, and do your analysis. 12 We've been asked about the economic 13 downturn that we're currently experiencing. 14 Prego, is it in there? Well, let's go back to 15 Global Insight, because the forecast that we do 16 have shows a little downturn in 2008, but 17 probably not downturn like we're seeing in 18 2009. 19 But it's like a dog chasing its tail if we 20 try and do that. What we try to do in our 21 forecast, what Global Insight tries to do, what 22 everybody tries to do is business cycles really 23 drive things, you know, especially these 24 commodities coming in here. 25 Historically, we have had expansions in 42 1 ECONOMICS STUDY UPDATE 2 our economies and we've had contraction. These 3 are recessions and boom times. We know for a 4 fact that's going to happen, because we haven't 5 found a way to fix it yet. 6 And now we've got the mother of all 7 recessions because a lot of people got greedy. 8 I tell my dad, if he hadn't raised me Catholic, 9 I could be a lot richer than I am today, but my 10 conscience bothers me. 11 You know, I got to do it right because 12 those nuns beat the heck out of me in school 13 and told me I had to. And my older sister is a 14 nun and she beats on me all the time. 15 She sends me these letters, you know, keep 16 your eye on the prize, brother. Anyway I 17 divert. All right. So Global Insight, we've 18 requested them, if they have an updated 19 forecast, more updated than the 5-09, Global 20 Insight in their forecast tried to program in a 21 three to five year business cycle, you know, a 22 whole complete up and down. 23 You can see in their forecast, the change 24 from year to year, you can see that business 25 cycle. 43 1 ECONOMICS STUDY UPDATE 2 We try to capture the long-range trend in 3 what we've seen in the past to project in the 4 future. We don't go after the highs. We don't 5 go after the lows. 6 You know, that's not reasonable. All 7 right. If we can get an updated forecast, if 8 they have one, we're going to look at that 9 forecast and reevaluate it against the '05 May 10 forecast. 11 We think that we -- if there's a 12 significant difference there, taking into 13 account the downturn that we're seeing in 2009, 14 we're going to use it, because we think we can 15 go through the analysis again, country to 16 country, because we've got spreadsheets set up 17 again that did it the first time. 18 That does a growth run and makes about 80% 19 of the assignments and the other 20% is by 20 hand. 21 So if it doesn't impact the schedule, 22 and my organization lives and dies by 23 schedules, we're going to try and get it in. 24 But the revised analysis should look at 25 all of this. Additional analysis needs to be 44 1 ECONOMICS STUDY UPDATE 2 accomplished in order to more finitely identify 3 the constrained and unconstrained vessel fleets 4 for Savannah Harbor. 5 Just another little example, with the FD 6 documentation, we made a growth assumption, 7 when we deepen that harbor one foot deeper, all 8 the ships are going to load one foot deeper. 9 Well, you have some ships that we call 10 Handymaxes. They're below a class that we call 11 sub-Panamax, that's below a class called 12 Panamax that's below a class called 13 Post-Panamax. 14 These ships can draw 36, 38 feet of water. 15 They're not carrying, 100% of the time, in a 16 fully loaded condition, just like all of our 17 big containers are. And we knew that, and we 18 knew that some of these smaller ships were 19 getting benefits, okay, that really they 20 weren't benefiting from. 21 But we decided that that inconsistency, 22 non-benefiting vessels receiving benefits, was 23 small enough that, you know, it would not 24 impact the formulation of a selection of the 25 NED plan. 45 1 ECONOMICS STUDY UPDATE 2 All right. It passed muster all the way 3 up the line, before we reorganized, and now 4 have the Office Water Projects Review to make 5 sure that we do a better job, a very good job 6 so we are not in the newspapers again. 7 All right. Facts of life. Here's our 8 response. We're going to do additional 9 evaluation to assess impacts of with or without 10 project conditions on vessel operations that's 11 loadings. The report will be revised in both 12 the analysis and the results. 13 You've seen the container ships come in 14 and out. Have you seen the big ones? You've 15 got containers stacked up like this, and then 16 you have the pilothouse. The pilothouse to be 17 up so they can see over the containers. 18 Post-Panamax ships, you know, there are 19 a lot of them on the design board. People have 20 their ideas of what they're going to look like. 21 We have the Talmadge Bridge, 185 feet. We 22 have Post-Panamax ships now that require and 23 now draft a little bit higher than 185 feet. 24 Maybe these newer Post-Panamax ships that 25 will come off the drawing board, or come out of 46 1 ECONOMICS STUDY UPDATE 2 the minds of these vessel designers might not 3 be able to negotiate the Talmadge Bridge. 4 So we've been instructed to investigate 5 that, and with the help of the Naval Academy 6 and some industry experts, taking at look at 7 the order books, what's on the books, what the 8 designers are thinking now; what's going to be 9 that air draft. 10 What we found out, they're doing something 11 like we've seen tow boats do on the inland 12 waterways. You know, they got a little jack up 13 jack down pilothouse, where if the pilot needs 14 to be further up, he can just raise his power 15 house -- his pilothouse. And if he doesn't 16 necessarily need it, he can lower it. 17 What they're going to do on what's 18 envisioned, what we see out there is as we 19 start stacking these containers higher for 20 these larger Post-Panamax ships, you know that 21 tower has got to go up because the guy's got to 22 see in front of him. 23 So he has to go higher than the 24 containers, because Coast Guard rules and 25 regulations say X distance in front of the 47 1 ECONOMICS STUDY UPDATE 2 ship, he's got to be able to see the water. 3 All right. Well, no big deal. We'll just 4 build it higher. The concept that they're 5 looking at now is moving that pilothouse 6 further forward instead aft. 7 Now, if you are placed further forward and 8 you have just fewer containers in front of you 9 and a lot more behind you, then you can go up 10 and still keep this distance in front of you 11 that you need to see what's in front. 12 And it's also of benefit to the storage, 13 they can more easily distribute it around this 14 section that's further forward in the ship. It 15 will go all the way down to the bottom. It 16 will have, you know, storage in there going 17 all the way down. 18 The machinery and the propulsion and crew 19 quarters -- the majority of crew quarters will 20 still back in back, but that will be some crew 21 quarters that are moved up further front in 22 this rectangle box, you know, further forward 23 in the ship. 24 So air draft is going to be addressed by 25 WR and written up in findings we've gotten from 48 1 ECONOMICS STUDY UPDATE 2 the Naval Academy, and what this new fleet of 3 Post-Panamax ships would look like, and 4 probability that those ships would come to 5 Savannah Harbor 6 So prego, we're going to do it right, and 7 I hope I'm coming to the end. Okay. Some more 8 things that we've got to cogitate on, and I'll 9 reach our analysis as to the record from the 10 PGM. 11 We've got to look at this tonnage that's 12 coming to Savannah, are we stealing this from 13 other ports on the East Coast. If it is, then 14 we have got to account for that, because it's 15 just a transfer. All right, transfers. 16 Well, instead of benefiting Georgia, 17 benefiting South Carolina, kind of like 18 regional transfers; we are in the business of 19 measuring national economic development. That 20 is everybody in the nation benefits. 21 Like I say, lower transportation cost 22 savings, because I'm taking money from people 23 in Washington State, Oklahoma, Idaho to deepen 24 your channel. They say, what's in it for me? 25 You're using my tax dollars. Don't use my tax 49 1 ECONOMICS STUDY UPDATE 2 dollars to enrich Georgia, South Carolina. I 3 want a piece of the action too. 4 So the federal government says national 5 economic development benefits. The nation has 6 got to benefit because you're using public 7 dollars. So we've got to sift out the 8 transfers. 9 We're going to look at the actual and 10 similar practice and expert judgments. That's 11 what we're going to be guided by. Actual, 12 we've got the data. Similar practices, 13 usually. There's a rule of thumb out in the 14 industry. 15 Usually what happens on the West Coast, 16 you'll see it happening on the East Coast 5, 7, 17 10 years later. What's the West Coast? LA. 18 Long Beach, I mean, they have got the whole 19 ocean. 20 They don't have bridge problems. They 21 have deep water. The big ships are going to 22 gravitate there because there are no 23 constraints. If you want to come to the East 24 Coast, I've got constraints. I got the Panama 25 Canal. I've got ditches you have to come up, 50 1 ECONOMICS STUDY UPDATE 2 rivers and harbors, you know. 3 They are bottlenecks. They are 4 restrictions, all right, but as things -- as 5 the ships get larger on the West Coast, what do 6 they do with that generation of ships before 7 that? Well, they migrate to the East Coast. 8 The NED plan -- here's the NED plan. The 9 government says look, there are public works 10 kinds of projects out there that the private 11 sector will not invest in, because the profit 12 motive isn't large enough. 13 Trying to get the private sector to deepen 14 harbors, you know, that lots of people going to 15 benefit from is kind of like public radio or 16 public TV; who is going to pay for it? Who is 17 going to go out there and try and make money at 18 that when everybody can get it for free? 19 If private industry deepened the harbor, 20 it's a public good and everybody can use it, 21 you're not going to get investors to invest in 22 that. 23 So the government says, that's up to us to 24 do that. That's a federal interest, providing 25 infrastructure for commerce. That's what makes 51 1 ECONOMICS STUDY UPDATE 2 our economy, contribute to the GDP, it pays the 3 taxes and keeps things going; but the 4 government says, I've got to get a dollar back 5 for every dollar I invest. 6 That's the hurdle rate. If you get a 7 dollar benefit for a dollar cost, you're in the 8 game. You've got a project that meets economic 9 criteria. 10 You have engineering criteria. You've got 11 to be able to build it. You've got the 12 environmental criteria you've got to make, and 13 you know, no net loss and mitigation. 14 I mean, you've got a myriad of things 15 under the environment. Economics, you've got 16 the hurdle rate, one to one benefit to cost 17 ratio. 18 Now, you get in the game with a B/C 19 ratio of one to one, but the government wants 20 to know as I deepen this project, where do I 21 get the most bang for my buck? 22 We measure that in net benefits, benefits 23 in excess of cost. Once you've got your cost 24 covered now, and you still have benefits, show 25 me that plan with the largest amount of 52 1 ECONOMICS STUDY UPDATE 2 benefits above that one to one ratio, the net 3 benefits, because that's the most efficient 4 plan. 5 The government gets the biggest bang for 6 its buck there. Once I identify that plan or 7 that deepening alternative, the government will 8 cost share with a partner up to that NED plan. 9 The cost sharing pattern can say whoa, I 10 don't want that much. I can't afford it. I 11 want something smaller. The government says 12 fine, I'll give you something smaller. 13 It is still economically justified, 14 engineeringly feasible and environmentally 15 acceptable, or the partner can say I want 16 something bigger. 17 The government says fine. You pay 100% of 18 the additional cost. We're still a partner 19 with you. 20 So, it's very important that I do my job 21 right and make sure that NED plan is the NED 22 plan, because if it's not properly formulated 23 and defined, I'm wasting government dollars, 24 and they will take my firstborn and my 25 grandkids and my wife and I won't comment. 53 1 ECONOMICS STUDY UPDATE 2 But I love my wife, been married 38 3 wonderful years. I'm taking her out for 4 Valentine's Day. We're going to have lobster 5 at my yacht club of which I am the commodore. 6 I'm the Commodore of the Mobile Yacht Club. I 7 love saying that. You might have seen my boat 8 pictures. But she's a wonderful lady, and I 9 don't want to lose my kids. I don't want to 10 lose my wife. 11 But that's why -- we said in six months -- 12 in six months, we're going to redo this 13 economic reevaluation. I told Colonel Kertis 14 that. 15 He asked us for a schedule. I said, 16 Colonel, this is my best and final, because in 17 the Corps of Engineers as soon as you give them 18 a schedule, and it's six months, they say okay. 19 Go back to the drawing board and tell me what's 20 required to do it in four month. 21 Then you bring it to them. Here it is, 22 Colonel. This is what it's going to take. 23 This is how much it's going to cost. 24 He says, okay. Go back and tell me what 25 it will take to do it in one month. Colonel, 54 1 ECONOMICS STUDY UPDATE 2 it can't be done. Oh, yes it can. Go back 3 and tell me. I said, Colonel, this is our best 4 and final. 5 I said, if you want to negotiate, I'm 6 going to negotiate with you, and I'm going to 7 salute, and I'm going to give you what you 8 want, but it's not going to be right. I don't 9 want to play the games, so, you know, talk to 10 my boss. Tell him you want four months and 11 I'll give it to you. But I'm telling you the 12 best deal is six months and that is 13 unbelievable. 14 That was assuming that we could use the 15 forecast that we had used in the report that we 16 took to the AFD. We found out in later 17 discussions with the OWPR, those forecasts were 18 not going to pass muster. 19 So went to Global Insight, got the new 20 forecast, remassaged all that data, rebuilt 21 things all over again, and didn't add another 22 day to the schedule. We figured we could do 23 that, and we did. 24 We got the new forecast. We've ran it by 25 the Office Water Projects Review, and so far it 55 1 ECONOMICS STUDY UPDATE 2 seems as though they're buying in to our 3 forecast as we have now. We're still trying to 4 make this six months, but boy it's getting 5 tough. 6 Six months ends the 31st of March, and We 7 started October. We're doing a whole 8 feasibility study all over again from zero in 9 six months. 10 It takes the Corps two or three years to 11 do that. It took 10 years to get that report. 12 And we're doing it from scratch, the forecast 13 all the way up, in six months. 14 And I hope we don't get what we're paying 15 for; in other words, I'm trying to say, you 16 know, if you buy it cheap it's probably on the 17 cheap. 18 I mean, if you put the resources into it 19 and you buy quality, it's probably quality. 20 And that's what I gave -- excuse me -- that's 21 what the team gave. That's what the team gave, 22 the economics team gave to Colonel Kertis. And 23 you know what he said, go do it. You got six 24 months. Go do it. 25 All right. I've taken enough of your 56 1 ECONOMICS STUDY UPDATE 2 time. On the NED plan, you know, I say we've 3 got to follow these net benefits, and they're 4 increasing. Usually they will take a turn and 5 decrease. 6 We might not be able to identify that NED 7 plan because of our legislation for this study 8 says 48 feet. That's the maximum you can go. 9 The NED plan might be 49 or 50 feet. So they 10 have instructed us that we don't have to 11 identify the NED plan, if the benefits are 12 still increasing up to 48 feet, but we can't 13 call it the NED, but a rose by another name is 14 still a rose. 15 They said we've got to call it federally 16 supported plan. All right. Put on your 17 glasses. This is six months study scheduling. 18 You can't see it because I should have bolded 19 it, okay, but look; the 1st of October, end 31 20 March. We've got the IPR, the in progress 21 reviews, and the checkpoints in there. 22 And hold your breath. I'm going to show 23 you only one more thing and you're going to 24 need your glasses for it, but hopefully you'll 25 understand what we're doing. 57 1 ECONOMICS STUDY UPDATE 2 This is a very simple example of what 3 we're doing. All right. Pretend you can see 4 this. The East Coast of the United States to 5 the East Coast of South America imports, that 6 means the vessels are coming in. They're Handy 7 size vessels and these are the number of 8 transits. 9 Here's what we do. Here's the design 10 draft in this first column. That ship has 11 a design draft, is a class from 24 feet to 12 27.99 feet, 28 to 29.99. That's a two foot 13 span. Then from 30 feet on down to 51 feet -- 14 we go by one foot increments. 15 We looked at the historical data. This 16 happens to be 2007, the number of transits. We 17 had two, during 2007, that drew between 24 and 18 27 feet. We had five that drew between 28 and 19 29.99 feet. Totally we had 22 visits by 20 Handymax vessels at Savannah Harbor. 21 Now, that's their design draft. Here's 22 the sailing draft, and I apologize for the 23 zero. I have to use the zeroes because it's 24 numerical, and I can't put in any characters. 25 But here's what we've got. Here's a guy 58 1 ECONOMICS STUDY UPDATE 2 that's coming in at his design draft -- no one 3 does. Here's a guy that's light-loaded a half 4 a foot. This guy is light-loaded between a 5 half foot and one foot, one foot, a foot and a 6 half. 7 Our first observation, that particular 8 vessel came in two and a half feet 9 light-loaded. 10 Another vessel, same class, came in four 11 to four and a half feet light-loaded. Another 12 vessel came in between four and a half and five 13 feet light-loaded. Another -- three vessels 14 came in between five and five and a half feet 15 light-loaded. 16 This is our transit spreadsheet. Now, 17 spreadsheets have rows, and they have columns. 18 They're like a sheet of paper. Now, if you 19 take another sheet of paper and put it behind 20 it, you have rows and columns. 21 For every observation now, I'm going to 22 have sheets behind it that takes that 23 observation at transit; for instance, these 24 three transits, if on this sheet of paper we 25 could go straight through to seven other sheets 59 1 ECONOMICS STUDY UPDATE 2 of paper -- let me make sure -- one, two, 3 three, four, five, six -- six sheets of paper, 4 the first page will have transits, how many 5 vessel calls we have. 6 Right behind it in that same cell 7 location, I know the loads. The third page, 8 I know the empties. The fourth page, I know 9 the total tons and TEUs. I know the average 10 tons. I know the total TEUs. I know the tons 11 per TEU. 12 So each transit, each vessel in here, if I 13 go back to the next page I've got the goods. 14 I've got the story. Here are the loads. These 15 are the loadings, TEUs by count for each 16 transit. 17 There are the empties, total tons, average 18 tons, the sum of empty and loaded TEUs and the 19 tons per TEU per each deviation from design 20 draft for import, for export, by design draft, 21 by dead-weight draft, ships coming in, ships 22 going out and Handy size, sub-Panamax, Panamax 23 Post-Panamax. 24 There are 55 of these workbooks with six 25 sheets in them, and to me the multiplication 60 1 ECONOMICS STUDY UPDATE 2 says I've got 300 of these sheets of these 3 views. Now I know what's going on -- really, I 4 don't know. The tables know. 5 Historically, now we can look at these 6 average tons per TEU by route, by vessel plan, 7 by design draft, average TEUs, imports, 8 exports. 9 We'll take this forecast tonnage and these 10 ships that are not fully loaded, we can start 11 loading them up, because we've got cost look-up 12 table that you go search for the given ship 13 that you have, who can carry that tonnage most 14 efficiently; in other words, give you more tons 15 for the buck. 16 So the model is going to load up these 17 ships based on efficiency, just like a 18 rational, economic man would make those 19 decisions. Then we have a maximum practical 20 load on that ship. 21 You know, you got to have empties. You've 22 got to have empty slots.. It's just a fact of 23 life. 24 If you don't have empty slots, how could 25 you get down at these things and get them off? 61 1 ECONOMICS STUDY UPDATE 2 You want to sit there loading and unloading to 3 get one down here you got to get off or put 4 back on? 5 We are building this spreadsheet model so 6 that it will make those economically rational 7 decisions that we can defend to our reviewers, 8 and we think we can pass muster. 9 I think these kind of details we have 10 done, looking at that historical data, having 11 a cost maximizing look-up table to make the 12 decisions, loading these vessels until they 13 can't be loaded anymore, and then tell you when 14 you can transition to larger vessels is the 15 answer. 16 Shoot me. I'm ready for the questions. I 17 apologize for the digression. 18 MR. DYSART: It was a very interesting 19 presentation. We appreciate it. The first 20 card I see up is David. 21 MR. KYLER: Yeah -- 22 MR. DYSART: Excuse me. Could we have a 23 break? We have a couple of people saying break 24 break. Let's take about a 10 minute break. 25 (Short Break) 62 1 ECONOMICS STUDY UPDATE 2 MR. DYSART: Okay. We will reconvene now 3 and the first question -- the first question is 4 David Kyler, and then Steve Willis. David. 5 MR. KYLER: Interesting presentation. I 6 wanted to know a couple things, but the top of 7 the list is to what extent you can share any 8 insights about Global Insight that -- as it 9 forecasts the recovery from the current 10 economic credit crises? 11 MR. MOSEBY: When Global Insight gives us 12 -- when you purchase the information from them, 13 they give you a technical document that goes 14 along with the forecasts that explains things 15 about their assumptions about the length of an 16 economic cycle, and their thoughts about its 17 reoccurrence out into the future. 18 So they give you a technical paper 19 outlining all of their assumptions and their 20 methodology. So what we've done is to go to 21 one of the authorities, out in the private 22 sector, that specializes in containers and 23 forecasting container traffic. 24 You know, if you got -- garbage in, 25 garbage out. This -- Global Insight is a 63 1 ECONOMICS STUDY UPDATE 2 highly reputable firm. People use them. so 3 there must be a reason why. 4 And I can -- I can advise you, you know, 5 parts of it are coming soon. Once we get the 6 draft economic analysis completed, being March 7 31st or a few days later, God forbid, we'll go 8 through agency technical review again. That 9 is, the review is inside the Corps. We did the 10 review on our AFB documentation. 11 We'll look at that new analysis, and we 12 will take their results of their agency 13 technical review and the project guidance 14 memorandum that we got, and see if our new 15 analysis addresses all of these charges that we 16 were given in the PGM, send that to the Office 17 of Water Projects Review. 18 They will take a look at it and make a 19 determination if we have met their criteria in 20 that PGM. If not, we're going to have to go 21 back and forth until we get consensus and they 22 sign off on the PGM. Then the document will be 23 released to the public. 24 Now, what day that is, I don't know, but 25 it's not going to be too, too far in the 64 1 ECONOMICS STUDY UPDATE 2 distant future. If we do our job right, it 3 ought to be right. 4 MR. KYLER: Well, that's the procedure, 5 but you didn't -- you don't know what they say 6 about the recovery period for the current 7 situation? 8 MR. MOSEBY: No, I don't. I have not read 9 the technical paper. I couldn't -- I couldn't 10 elaborate on that. 11 MR. KYLER: And another question is, under 12 the new Office of Water Project or standards or 13 procedures; what, if any, new procedures are 14 there for monitoring the actual impacts of 15 projects, if there are consequences of the 16 project after they're built? Is there any new 17 requirement. 18 MR. BAILEY: I don't think there's any new 19 requirements for that, if you are talking 20 about post-construction for environmental 21 impacts. 22 MR. KYLER: Yeah, just to verify or 23 correct the procedure that's led to that 24 project being done, if necessary. 25 MR. BAILEY: The Procedure that led to 65 1 ECONOMICS STUDY UPDATE 2 the project. 3 MR. KYLER: Well, to gather data to what 4 actually happened after the project, compared 5 to what you forecasted would happen, and use 6 that deviation to correct procedure to improve 7 future project. 8 MR. BAILEY: So you're concern is -- your 9 question deals with economic projections 10 monitoring traffic afterwards? 11 MR. KYLER: Well, any aspect of the 12 analysis that led to the project, to the extent 13 that the Office of Water Project would be 14 reviewing the methodologies, would they also be 15 reviewing the affects of their application 16 in decisions to create future decision-making 17 procedures? 18 MR. MOSEBY: Okay. I'm sorry. I didn't 19 understand you. I thought you were in the 20 environmental arena, and monitoring the 21 environmental, but you're talking about 22 monitoring -- 23 MR. KYLER: Anything -- 24 MR. MOSEBY: -- the economics -- 25 MR. KYLER: -- everything, the economics, 66 1 ECONOMICS STUDY UPDATE 2 the environment -- 3 MR. MOSEBY: All right. To answer that, 4 all forecasts are wrong. I can tell you right 5 now, the forecast I got is as wrong as a 6 football bat. 7 The one that we might get that maybe a 8 month old from Global Insight will be wrong, 9 guaranteed, because no one -- no one knows. 10 It's the best guess at the time that 11 hopefully you use the best information that you 12 can get that you got to make a decision. 13 All forecasts are wrong. One guy says, 14 well, some of them are useful, all right, but 15 we try, as good stewards, to do the best job we 16 can. I go back to the office. I've got a 17 manual, 254 forecasting techniques. 18 We've got software that you can throw your 19 data in there and it will run it through 254 20 different forecasts -- hey, here's the best 21 one. You know, I don't have to choose. We 22 have things that will do that for us. But all 23 of it's wrong. 24 But in good faith, you get the best that 25 you can get and you go with it. All right. To 67 1 ECONOMICS STUDY UPDATE 2 go back and check ourselves and see how we did, 3 okay, really quick. 4 Ten Tom Waterway, whoever heard of that 5 one -- I was hired in 1986 with the Corps of 6 Engineers. As soon as I got there, there was 7 Ten Tom Waterway. I'm an operations research 8 analyst at the time.. I'm a modeler. 9 I'm not a full-blown economist yet, and 10 I'm teaching operations research at the 11 university. As soon as I step in there, oh, 12 you teach at the university. 13 Well, your economist did this paper and we 14 want you to evaluate what they did, you know. 15 These are my peers at the school. Anyway, our 16 first report done by an outside consultant said 17 the first year of operation 21,000,000 tons of 18 traffic would move on that waterway, and we 19 bought it. 20 But looking back at all of our inland 21 projects in the past, these things have to 22 grow. They just don't do that. But at the 23 time, there was a demand for coal. British 24 coal had some problems. There was South 25 African coal available. 68 1 ECONOMICS STUDY UPDATE 2 There was coal available in Birmingham and 3 Tuscaloosa, and if we get this ditch, all of 4 this coal going to move. Well, three, four, 5 five years later, another study had to be done 6 because we thought maybe the projections were a 7 little bit optimistic. 8 Another outside firm took a look at it. 9 The first year operations, 7,000,000 tons. 10 Okay. We built the waterway and we said hey, 11 everybody, come to our party -- 700,000 tons 12 moved in the first year of operation. 13 All right. I mean, you know, they did the 14 best they could at the time and things changed 15 over time. Coal just didn't develop. It just 16 didn't, and global economics change. 17 Here's a kicker for you. I got all the 18 coal in the world in Tuscaloosa and Birmingham, 19 and I got coal plants on the Blackwater River. 20 You take a conveyor belt at the mine mouth, and 21 run the coal out and dump it on a barge, and 22 you push it down the river 200 miles down to 23 mobile, and you use a scoop and put it on the 24 ground at the power plant and the power plant 25 generates electricity. Home grown coal, 200 69 1 ECONOMICS STUDY UPDATE 2 miles on the barge.. 3 It's cheaper to take a ship, run it down 4 to Columbia, load the ship up, bring it to 5 Mobile, take it off the ship and put it on the 6 ground, pick it up off the ground, put it on 7 the barge, and then barge it up to the power 8 plant, and it's cheaper because the coal at the 9 mine mouth in Birmingham is $30 a ton, but down 10 in Columbia it's $5 a ton. 11 Now, this is 15 years ago. My coal has a 12 higher sulfur content. The coal down there in 13 Columbia is a little cleaner, but mine has a 14 little higher BTU. So we mix it. We do a 15 little bit from Columbia and we do a little bit 16 from Tuscaloosa. 17 It's the same thing with the stuff coming 18 from China here. The lower cost of labor, you 19 don't pay medical benefits. You don't have the 20 holidays off. You don't have to put in safety 21 equipment and the environmental things that we 22 have to put on here. 23 Economically, it's going to see -- the 24 market's going to see the bottom line profits. 25 It's going to go wherever it is economical. 70 1 ECONOMICS STUDY UPDATE 2 Don't ask me stories. I know all the stories. 3 I've been there 32 years. 4 We go back and we did a paper on Corps' 5 projects that we forecast using these 6 techniques to justify projects. I think it was 7 21 or 22 projects that they took a look at, 8 Ten Tom was one, to evaluate our forecasting 9 methods and techniques. 10 It wasn't very flattering because stuff 11 changes. Back in the '30s and '40s change 12 happened over a long cycle of time. I mean, 13 you know, when I graduated I wanted a 17 jewel 14 Bulova watch. You know, that was it.. 15 They had been around for 60, 70 years, 16 German,17 jewels. Then, all of a sudden, these 17 little plastic watches started coming along, 18 and then they got quartz. They got this. They 19 got that. The life cycle just gets shorter and 20 shorter.. 21 We're a disposable society now, you know. 22 You use it. When it breaks, you throw it away 23 because you can't pay a repairman to fix it. 24 It's cheaper to buy a new one. 25 MR. DYSART: Through with your questions, 71 1 ECONOMICS STUDY UPDATE 2 David? 3 MR. KYLER: So the question -- I infer 4 that the question -- the answer to the question 5 is, there is no new standard you're aware of, 6 because of this Office of Water Projects for 7 reviewing post-project, to improve future 8 procedures, to refine accuracy of projections 9 and decisions supported by those projections? 10 MR. MOSEBY: Most all we can do is go back 11 and review what we did and gauge, with 12 hindsight, whether it was good enough or not. 13 To go back and say, you know, was it accurate 14 at the time, we might can do that. Maybe it 15 was for those market conditions, maybe it was 16 not. 17 But once the evaluation is done, the -- 18 the investment is there, if we have funding 19 like we did to go back and look at our 20 processes in that one study, if the funding is 21 there we'll go back and do it. 22 If it's not there, it doesn't get done. 23 Usually, it doesn't get done because there's 24 competition for scarce dollars. So we follow 25 our guidance. 72 1 ECONOMICS STUDY UPDATE 2 We have SOP standard operating procedures. 3 Until they put it in there we have to do it, we 4 don't do it. We have to spend the money. 5 MR. KYLER: Then the obvious counterpoint 6 is if that's not required, how would the 7 effectiveness of the Office of Water Projects 8 new standards be verified? 9 How would you know that their new level of 10 hyper review is achieving anything? 11 MR. MOSEBY: Well, think about this 12 project. Think about the assumptions, the 13 growth assumptions that we made before, and it 14 says -- I mean, you know, it's not bad. 15 It's just that it didn't sufficiently 16 address the way container ships are actually 17 operated today, and that's true. That is very 18 true. 19 But, you know, that was back 2006 when we 20 finally got the methodology and the forecast. 21 So much has changed from 2006 to 2009, so their 22 job -- their job at the time we're doing the 23 study, like right now this six month thing, 24 their job is to make sure that our analysis now 25 more accurately described the operating 73 1 ECONOMICS STUDY UPDATE 2 procedures at Savannah Harbor. 3 And I hope that all my waxing on and 4 waxing off today has kind of, you know, insured 5 that yes, I'm trying to incorporate the way the 6 container ships are operating today into this 7 economic study, so the Office of Water Projects 8 says yes, you've addressed our concerns and 9 this is more like the way they're operating. 10 And that's the best we can do at that 11 point in time, because we know tomorrow things 12 are going to change. 13 MR. DYSART: Steve, Hope, Tom and Morgan. 14 Steve. 15 MR. WILLIS: Very interesting. I was just 16 kind of following up on the last question. You 17 know, if -- if we base our projections on 18 pre-October 2008 situations, Bear Stearns would 19 have a great future, but Bear Stearns is out of 20 business. 21 MR. MOSEBY: That's right. 22 MR. WILLIS: So I'm really wondering if 23 you are accounting for the current economic 24 conditions as well as I think you should. 25 Also I've got a question, specific 74 1 ECONOMICS STUDY UPDATE 2 question; if you project the traffic out for 3 the next, you know, 20 years based upon your 4 model, and it turns out that when you come out 5 with a draft report your projects are 20, 30, 6 40% wrong, this is not talking about something 7 in the far distant future, this is right now. 8 MR. MOSEBY: Yes, it is. 9 MR. WILLIS: If you're that far wrong now, 10 how wrong do you have to be before you say this 11 isn't working? 12 And if you did see your numbers are going 13 to be wrong, based on the model and the data 14 you're using, would you hardwire the answer so 15 that it was at least right on March the 31st, 16 or would you stick to the parameters on the 17 model that you're using? 18 MR. MOSEBY: All right. The specialty 19 model that we had is data driven. The forecast 20 is driving that model. We're going to be 21 hands-on. The IWR module of the model is 22 making the economic decisions. 23 My work is just adding, subtracting, 24 multiplying and dividing. Kim's work, Kim 25 Otto, she's our economist in the Mobile 75 1 ECONOMICS STUDY UPDATE 2 district office that's been with the project 3 since, I think, '05 or '06 when we picked it 4 up, she's working with the forecast to take 5 Global Insight, convert it to tons and TEUs as 6 far as they go 2028. 7 We take the last five years of their 8 forecasting and average them because we have to 9 do a 50 year throw-out. We take those five 10 years average and just let it rip, because when 11 you get that far out in the future, no one 12 knows. 13 That's the best thing to do, we have 14 found, through experience. So all she is doing 15 is taking these country to country, assigning 16 them to routes, and doing adding, subtracting 17 and dividing. Okay. The meat of this thing is 18 in the IWR module that loads up the ships that 19 have capacity on them, and have channel depth, 20 and once we get them to their maximum probable 21 load, start transferring more efficient 22 vessels. 23 Okay. So tonnage is driving the train. 24 Tonnage, TEUs, we don't decide. That's driven 25 by Global Insight's forecasts. We're kind of 76 1 ECONOMICS STUDY UPDATE 2 hands-off. We're letting the forecast drive 3 the train. That way it's transparent. 4 You can look at that forecast, you can 5 look at our methodology, make sure we're not 6 doing these behind the scene manipulations, and 7 it's being based on the economic climate 8 minimizing and maximizing. 9 Just for a point of clarification then, 10 because we're starting from this weighted base 11 year forecast, we're starting from a point much 12 lower than what we started from in the AFD 13 documentation. 14 We've taken those forecasts and draft. 15 We've also looked at other forecasts. The GPA 16 has a contractor that does work for them. They 17 have been gracious enough to share with us 18 their forecasts. 19 Now, think about this, a dollar today 20 is really big dollar, but a dollar down the 21 road gets smaller and smaller. Until we dig 22 this project and get it in place in 2015, the 23 future without project condition and future 24 with condition is wash, so there are no 25 benefits until 2015. 77 1 ECONOMICS STUDY UPDATE 2 And if you look at Global Insight, their 3 consultants forecasts, the Corps of Engineers 4 adjusted forecast, at 2015 they all arrive just 5 about at the same place. So when the benefits 6 start, once we complete that project, get it 7 dredged, whatever it is; 2015 is when we start 8 adding up the numbers, and that's still kind of 9 far down the road. 10 We do not chase -- we don't try to 11 predict these ups and these downs in the cycle. 12 You just can't call it. I mean, look at Bill 13 Clinton, 12 years. I mean it's been a long 14 time since he had that. But we do the best we 15 can based on the historical past, and three to 16 five years on the average, and Global Insight's 17 forecast. 18 So we try and strike a medium and do 19 sensitivity analysis, plus 10% minus 10% on the 20 forecast. Did the NED plan change plus or 21 minus 20% on the forecast? Did the NED change? 22 If it changed, then we tell the 23 decision-maker. He gets paid the big bucks. 24 Does that kind of get to your point? 25 MR. WILLIS: Basically, you won't have 78 1 ECONOMICS STUDY UPDATE 2 where the projection will be on March 31st, 3 when you come up with the draft report, because 4 you're looking at a longer range -- 5 MR. MOSEBY: Right now, we're based on the 6 May 2008. We're trying to see if they have a 7 more updated forecast. Now, take into account 8 what we're seeing presently in the industry. 9 We're going to take that, if they have it, 10 and compare it to the May '08. We're going to 11 make a decision if that's a significant 12 difference for us to use the now updated 13 updated, most recent forecast that takes into 14 account what's happening presently. 15 And if we believe that's significant, and 16 it won't extend the schedule, we're going to do 17 it. 18 MR. DYSART: Hope. 19 MS. MOORER: One thing, Dave, I think it's 20 important to know. You were asking about 21 procedures and policies. The Office of Water 22 Projects Review that's put in place, it's a 23 relatively new body, and it's evolving as we're 24 working with it. 25 So I think you'll probably see things such 79 1 ECONOMICS STUDY UPDATE 2 as you mentioned, such as review of past 3 projects in the future. This is a relatively 4 new body, and very few projects have been 5 through this process yet. 6 MR. MOSEBY: Most of them came right back. 7 MS. MOORER: Of those 10, not many 8 proposed deepenings yet, so I would say it's 9 evolving. 10 MR. KYLER: Do they have a suggestion box? 11 MR. MOSEBY: Oh Yeah. 12 MS. MOORER: I don't know about online. 13 MR. MOSEBY: You can contact us. It's 14 that Office of Water projects. You're a 15 taxpayer. April 15th, I love you. You know, 16 you write a check. I have to write one too. 17 You've got your representatives and your 18 Congress that speaks for you. Speak up. Make 19 yourself known. 20 MR. DYSART: Tom Wright. 21 MR. WRIGHT: I have two comments. First 22 David, I'd like to remind you and everybody 23 that the Operating Guidelines Committee has 24 been in discussion for about a year now with 25 Georgia Southern University to see if they will 80 1 ECONOMICS STUDY UPDATE 2 take over the computer models that are being 3 used to evaluate and support this program. 4 Not only the environmental models, but 5 also they have an intermodal logistics area 6 that would look at the economic stuff, and it 7 would provide some real world practicality to 8 what they do, and it would give the Savannah 9 community the opportunity and the benefit of 10 sustaining some of these models, seeing how 11 well they perform, and not having to develop 12 them from scratch, if we need to do something 13 again. 14 The progress has been a little slow over 15 the last year, but the initial discussions with 16 them have been very positive. If they do that, 17 it would be funded by Georgia Southern and 18 covered by them. 19 I think that that's -- the Operating 20 Guidelines Committee deserves credit for taking 21 that step. 22 My second comment is just my own opinion. 23 I know that all of these models are very 24 challenging. They're very difficult. We can 25 talk forever about their accuracy, but the 81 1 ECONOMICS STUDY UPDATE 2 importance, for the Corps and to our country, 3 is that all the different projects get compared 4 by a consistent system. 5 If there are projects here and in Boston, 6 the Corps evaluation should be the same for 7 both projects. It should be the same as 8 Portland Oregon. And you may not be able to 9 achieve the accuracy that you want on some of 10 these models, but the important characteristic 11 is the consistency of evaluation from project 12 to project. 13 And with that consistency then, Congress 14 makes a decision as to where they want to spend 15 their money. 16 MR. MOSEBY: Well said. 17 MR. KYLER: Quick reply to that. 18 MR. DYSART: Sure David. 19 MR. KYLER: Of course, the value of 20 consistency cannot be argued. But the point 21 is there are, evidently as history shows, there 22 are points in time that the Corps reaches a 23 decision to change that standard of first 24 seeking that consistency, which they did in 25 establishing the Office of Water Projects 82 1 ECONOMICS STUDY UPDATE 2 Review. 3 So then the question is not consistency. 4 The question is how you change the standard for 5 achieving consistency. I was just -- that was 6 the basis for my questioning. It's more in the 7 exploring the new standards under that new 8 office. 9 MR. WRIGHT: I think it was called 10 continuous improvement when we talked about it 11 last time. 12 MR. MOSEBY: This will serve the basis 13 for what we call the test for the Monte Carlo 14 simulation model. It's a national model. 15 Part of our cleaning house, all models 16 have to be certified, and you -- if you use any 17 other model, you're not restricted as to which 18 model you can use. If you use any other model, 19 it has been certified. 20 If you use a Corps approved model 21 developed by the Institute of Water Resources, 22 they pay for the certification of the model by 23 an outside source.. 24 We have a hurricane and storm damage 25 evaluation model that is just about finished 83 1 ECONOMICS STUDY UPDATE 2 with certification. If you are doing a beach 3 study, storm damage reduction, shoreline 4 erosion reduction, you use the IWR simulation 5 model. It's been certified. 6 You use one off the shelf that you built 7 yourself, or you purchased from someone else, 8 you face getting that model certified and 9 getting it past the Office of Water Projects 10 Review. 11 So, we have that. We have Monte Carlo 12 simulation for flood damage reduction. We have 13 Monte Carlo simulation for deep draft widening. 14 If we just had a harbor widening project, I've 15 got a model, but we don't have the deepening. 16 Widening hasn't been certified because we're 17 going to add the deepening model. 18 So why pay somebody a half a million 19 dollars to certify the widening model, and 20 later go back and pay another half million to 21 certify the deepening? 22 But because there's a product we can use 23 it and say go see how good we are to the 24 Office of Water Projects Review. So what we do 25 is a little bit less than a water model 84 1 ECONOMICS STUDY UPDATE 2 certification. We do what we call an approve 3 for use. 4 We take that model, hold everything that's 5 possible, vary some input, vary an input, look 6 at output; does it look ready? Take the model 7 and exercise it, run a couple of projects 8 through it. Do the results look reasonable, 9 without actually going and looking at the black 10 box code. 11 We don't have black boxes anymore. All of 12 us have got to be real consumers, codes, and 13 it's got to be model certified. These 14 spreadsheets, my adding, subtracting, 15 multiplying and dividing every cell will be 16 looked, and at these spreadsheets will be 17 approved for use. 18 But every cell my spreadsheet, Kim's 19 spreadsheet, and that model of IWR, all of it 20 has got to be certified. As soon as we finish, 21 all of them go with our documentation and they 22 have to be certified.. 23 So we're trying to clean house, okay, and 24 have these checked. Office of Water Projects 25 is new. When you are the new kid on the block, 85 1 ECONOMICS STUDY UPDATE 2 you've got to justify yourself, you know. 3 But the good thing about it, the 4 government track record, we can create agencies 5 but we don't how to kill them. You know, they 6 tried to kill the SBA one time. SBA's still 7 alive and breathing. The government has never 8 shut down -- I mean, very few things that it 9 has created has it ever shut down. 10 You know, you've seen on 60 Minutes, 11 there's one guy -- haven't got anything to do. 12 They should shut me down. He wrote them and 13 told them, hey, I ain't nothing to do. It's a 14 waste of money. Shut this thing down. He's 15 still there on the job. They can't even shut 16 it down when there's a reason. 17 MR. DYSART: Morgan, do you have an answer 18 to that or do you have a question? 19 MR. REES: I want to comment or add 20 something to the response to David's question 21 and briefly Steve. 22 In addition to being an engineer and a 23 consultant, I have a liking for history, so let 24 me put in a historical perspective from having 25 been there, done that in Washington for a 86 1 ECONOMICS STUDY UPDATE 2 number of years and other stuff. 3 The Office of Water Projects Review is 4 yes, a new office, but it is a successor of a 5 series of offices that go back at least to 6 1902. 7 I haven't been able to track it back 8 further than that, but in 1902 there was an 9 organization created called the Board of 10 Engineers for Rivers and Harbors. 11 They had essentially the same function 12 as what the Office of Water Projects Review 13 has. They existed until 1988 when they were 14 disbanded and replaced by -- it wasn't a 15 specific office, but it was a process called 16 the feasibility review conference, which had 17 essentially the same responsibilities as the 18 Office Water Projects Review. 19 And all of this -- that morphed a couple 20 of times since then because of, you know, 21 organizations. Every time you get new people, 22 oh, you've got to change the organization. 23 They changed, but the process and the objective 24 has been there since at least 1902. 25 And change -- and an integral part of the 87 1 ECONOMICS STUDY UPDATE 2 responsibilities of the people, who populate 3 these various morphed organizations, was to 4 make sure that what they were doing made sense, 5 was consistent and was current. 6 And you can go back and look. In the 7 Corps, in different elements of the 8 organization, there are the guidance documents 9 that come out from time to time that deal with 10 updating the process. 11 So, I mean, if you have somebody who let's 12 say is doing a doctorate in government history 13 or something; they could trace all of this 14 stuff, and show when documents came out, and 15 adjusting the process this way and that way. 16 The responsibility of the people who are 17 running these organizational elements includes 18 making sure that they're current and as 19 accurate as possible. 20 You may not be able to point to a specific 21 time when, yes, they went back. Like Bernard 22 was saying, they took 21 studies to see how 23 well the process was working.. That may not 24 happen a whole lot, but it happens 25 continuously. 88 1 ECONOMICS STUDY UPDATE 2 And there are things called engineer's 3 circulars which are documents that headquarters 4 puts out, which can modify a regulation without 5 going back through and modifying the entire 6 regulation, which is an incredibly cumbersome 7 bureaucratic process. 8 But anyhow, the point is that the kind of 9 thing I think you're asking for is done on a 10 continuous basis. Like Tom him said -- I 11 forget the term he used a minute ago -- the 12 continuing adjustment to the process. 13 And that's done day in and day out by the 14 professionals who run these organizational 15 elements. 16 And just quickly on Steve's comment, I 17 think Bernard gave a good, excellent response. 18 Nothing is going to count until 2015 anyway. 19 So you can't predict any interim, radical 20 changes or how they will affect the outcome. I 21 just reflect back when Georgia Ports Authority 22 did the initial feasibility study. 23 At the time we completed that, there was 24 what we called the Asian economic flu. Japan's 25 economy tanked, and at that time Japan was the 89 1 ECONOMICS STUDY UPDATE 2 driving force. China was not in the Asian 3 economy. 4 Everybody said, well, what's going to 5 happen that include these predictions? If you 6 look back, very little happened to them. There 7 was a slight downturn in the late 1990s, and 8 there was another slight downturn after 911 in 9 2001. But the trend has stayed constant, and 10 that's what you need to look at, what Bernard 11 was explaining earlier. 12 In order to make a legitimate economic 13 projection, it's got to be more generic than 14 specific, in terms of year by year. We do have 15 a lot of data that show that virtually -- not 16 virtually -- well yeah, everyone. 17 There may be a few little exceptions, the 18 Corps has under-predicted growth. I do know 19 specifically that Global Insights always 20 under-predicted growth. So, you know, there 21 are lots of uncertainties in doing this, 22 whether you do have trends and you do know 23 where you are relative to the trend lines. 24 And on top of all that, because of the 25 uncertainties, there's an element of every 90 1 ECONOMICS STUDY UPDATE 2 study, Bernard mentioned it, risk and 3 uncertainty, also called sensitivity analysis, 4 where the Corps says okay. We made this 5 assumption. What happens to our decision if we 6 make a different assumption? 7 They test for the sensitivity. It's about 8 as thorough and objective analysis that -- that 9 anybody has been able to create. And one other 10 little other point of history, and I've 11 experienced this in Washington; each time a new 12 administration came in, and I started in the 13 first Reagan administration, I'm that old, 14 every new administration says, let's have a 15 look at the Corps of Engineers' process. 16 And they have done that. They bring new 17 people in to the Office of Management and 18 Budget. They go through the process. Everyone 19 has, without fail, ended up saying that's the 20 best you can do. 21 It's not perfect. There are lots of 22 uncertainties involved, but they have not seen 23 fit to change the process in any substantive 24 way. These were not trivial reviews. So 25 anyhow, that's just a little historical 91 1 ECONOMICS STUDY UPDATE 2 perspective on how we got here from there. 3 MR. DYSART: Before we go to Will, I'll 4 just say that back in the mid '70s, I was very 5 much an insider and very much an outsider. I 6 had the privilege of sitting -- attending 7 several Corps of Engineers for rivers and 8 harbors deliberations on some incredibly 9 complex and controversial projects. 10 And I had the feeling back then that it 11 was a very professional staff, and very 12 rigorous standards and they did a nice quality 13 control job. 14 So there has been, as Morgan pointed out, 15 there has been this effort to try to -- to try 16 to do improvement. There's also plenty left. 17 Will. 18 MR. BERSON: I noticed in your 19 presentation materials you were talking about 20 weighing the concept of Savannah Harbor without 21 project as being a limiting factor on traffic. 22 And I wondered if you could talk about 23 that a little bit, because it's kind of a new 24 concept that I actually haven't heard in 25 discussing, you know, this sort of this 92 1 ECONOMICS STUDY UPDATE 2 multiport perspective on trade. 3 MR. MOSEBY: In order to manage economics, 4 one of our really difficult jobs to do, and 5 we've been reminded over and over again in our 6 studies, you've got to get the future without 7 project condition right. 8 That is pretend the government doesn't 9 exist. There isn't a snowball's chance in heck 10 that the government is going to come in and 11 dredge Savannah Harbor. 12 How would the industry and the harbor 13 respond? It's hard to get that out of your 14 mind, because you know the government is still 15 there. We're going to do a study, and 16 nothing's going to happen or something's going 17 to happen. 18 So it's awfully hard to get the true 19 without project condition, if the government 20 isn't there, how would industry and the port 21 respond to that? 22 Once you define that, that's your 23 baseline. Then you do with project conditions. 24 Suppose I just deepened the harbor a foot. The 25 government comes in 2015 the harbor instead of 93 1 ECONOMICS STUDY UPDATE 2 42 it's 43 feet. 3 The difference between that foot of 4 deepening with project and without project 5 condition, no chance the government's going to 6 come in, that's your management of economic 7 efficiency of that one foot of deepening. 8 So let's say we do not deepen Savannah 9 Harbor, there's no chance in the next 50 years, 10 my period of analysis. What are they going to 11 do? 12 Industry might take Savannah and move its 13 position on the strength. It will come in 14 heavy and go to New York and offload. The ship 15 gets light until it can make Savannah. Now, 16 the extra mileage that it has to run, you know 17 right now you want to do it efficiently, the 18 extra mileage has to run is just a response to 19 economic conditions and still coming to 20 Savannah Harbor and serving that demand. 21 Now, they might decide economically, heck, 22 it's not efficient for us to go to Savannah and 23 light-load. So they might take Savannah off 24 the route right now, and that's what we're 25 being threatened with. 94 1 ECONOMICS STUDY UPDATE 2 We've got customers out there that's 3 telling the port, we've got these larger 4 deeper ships, and at 42 feet it's not efficient 5 for us to keep coming to Savannah. So, we're 6 going to have to go to another harbor or drop 7 your business although. 8 If they drop it off at another harbor, 9 then you've transportation costs, and maybe 10 getting to the distribution centers here or 11 another distribution center. 12 We have got to defend that future without 13 project condition to the Office of Water 14 Projects Review. 15 It's got to be believable, and it's got to 16 be based in fact. So we've got the crystal 17 ball here, and that's why -- see, my job as an 18 economist, I tell you I really didn't become a 19 full-fledged economist. I worked their marks 20 for them. I did their simulations for them. 21 You know, I got to see everything that they 22 did. 23 Economics is just standard formulas and 24 inverses of those formulas. And the engineers 25 take one course, engineering economics, and 95 1 ECONOMICS STUDY UPDATE 2 learn. Economics is say telling a story. 3 Economists are story tellers and story 4 writers. We write a story about the future 5 without project conditions, best as we can 6 determine. And here's the story. Here's 7 what's going to happen, and it's not completely 8 determined. 9 Its like statistics. It's soft science; 10 25, 35, 40% of our job is art. It's not 11 numbers. It's an art to tell that story and 12 find out how industry will respond, the port 13 will respond, the environment out there in 14 the world, how it would impact us if we didn't 15 do anything. 16 And that's one story. Then we tell the 17 next story. If there's a federal action, how 18 would that 50 year future look different from 19 the 50 year future without. I hope that's what 20 you're asking. 21 MR. BERSON: Let me sort of -- the 22 question I'm really asking is, does the fact 23 that Charleston, a more natural deep harbor 24 than Savannah, has what 50 foot, I think, 25 clearance depth. 96 1 ECONOMICS STUDY UPDATE 2 MS. MOORER: No, 45 deepened. 3 MR. BERSON: What I'm asking is, is that 4 somehow an argument, is the idea that 5 surrounding ports are deeper than Savannah end 6 up being an argument for deepening Savannah 7 because of the difficulty you just described of 8 moving cargo around to make that happen? 9 MR. MOSEBY: In particular Charleston, you 10 have to look at the whole thing. It's not just 11 deep water. You can put deep water there, but 12 then you have to look at the constraints on the 13 facilities they have at the port itself. 14 And I believe they're physically 15 constrained, so you can dig the dickens out 16 of that thing, but if you can't -- if you don't 17 have enough infrastructure there to support 18 what's coming in, then you're limited. 19 So we've got all these constraints on the 20 neighboring harbors that we have to consider. 21 it's a very complex picture. 22 MR. BERSON: So then you do take into 23 account then; for example, Savannah may not 24 have depth, but it has landside capacity. It 25 had two intermodal facilities. It has -- I 97 1 ECONOMICS STUDY UPDATE 2 mean, how is it that you balance all those off 3 when you are actually -- the topic that you're 4 talking about is depth. 5 MR. MOSEBY: Yes. We're talking about 6 depth because the economics are based on depth. 7 My consultants, that I talked to over here at 8 Georgia Ports, they don't care about depth. 9 They care about TEUs, how many TEUs they can 10 get on a ship. 11 They know as a fact of life there's 42 12 feet draft. They operate right now in the 13 present with the 42 feet. That's how they make 14 their decisions. 15 If, in the future, it's deeper then they 16 change everything. But he doesn't care about 17 the economics of deepening. I mean, that was 18 one thing we were able to open their eyes to 19 was our process, and how important this 20 deepening was to measuring benefits. 21 But then they gave me their point of view 22 about their fixation on TEUs, loaded, empties, 23 average tons, all that of that stuff that I 24 didn't know. So, we had this symbiotic 25 relationship. I'm learning from them. They're 98 1 ECONOMICS STUDY UPDATE 2 learning from me. OWPR says, I have to look 3 at the whole coast and what's happening there, 4 That's why Global Insight, we've got to 5 forecast for the other ports and what they 6 think is going to happen there. Then we look 7 at the historical compared to what they're 8 forecasting; does this jive, are they following 9 the trend, are they below it or are they above 10 it? If there above it, why? If they're below 11 it, why? 12 The Savannah Harbor's sucking movements 13 from it. And then like I say, Savannah Harbor 14 now, everybody doesn't benefit. You don't come 15 in fully loaded all the time. 16 So there's new tonnage we're forecasting. 17 First, we have got to load up excess capacity 18 we have, before we could see benefits of that 19 in deepening. So that environment that exists 20 in the whole system you mentioned is one of the 21 most important. 22 That's why we're forced to do that, 23 because you just can't be myopic and look at 24 Savannah Harbor, you know, the whole world, the 25 rest of the world doesn't impact what's going 99 1 ECONOMICS STUDY UPDATE 2 on at Savannah. 3 MR. DYSART: Andrea and David. 4 MS. MALLOY: I didn't know if somebody 5 wanted to respond to Will, because I was going 6 to ask a different question. I know the 7 alternate scenarios looked at the analysis are 8 including the project with the Jasper port as 9 one of the scenarios. 10 Can you tell me what the first year is 11 that considers the existence of the Jasper 12 port, and then also if they consider a future 13 without project with the Jasper port though, 14 and that national economic impact that you 15 mentioned? 16 MR. MOSEBY: Wow. Hope, can you tell her 17 the best you can? I've got to plead ignorance 18 on that. 19 MS. MALLOY: Okay. This is just the first 20 update we've gotten in a while. 21 MS. MOORER: The analysis, Bill help me 22 out here too, that I remember that was done 23 looked at the Jasper port. Nothing coming 24 online before 2015, but the Jasper port if it 25 came on online at like 2015, 2018, 2025, you 100 1 ECONOMICS STUDY UPDATE 2 know, at various increments of time, if it were 3 to come on and if it were to -- like the 4 assignment of cargo to Savannah, if it were to 5 have 25%, 75% or 100% of the growth at 6 Savannah, how does that impact the project? 7 So it looked at, again, sensitivity 8 scenarios of how it impacts the project. 9 That's what I understand was done. 10 MR. BAILEY: It was also a variation on 11 the size of the facility. 12 MS. MOORER: Yes, if it handled -- 13 MR. BAILEY: Three different sizes, three 14 different dates, three different sizes of the 15 facility, three different amounts of -- 16 MS. MOORER: Filings of cargo. 17 MR. BAILEY: -- amounts of cargo. 18 MS. MALLOY: When you say how it affects 19 the project, is that saying national economic 20 impact taken into account? I mean, I'm not 21 sure -- 22 MR. BAILEY: Yes. 23 MS. MALLOY: So it is affecting the 24 project means the federal impact? 25 MS. MOORER: Yes. 101 1 ECONOMICS STUDY UPDATE 2 MR. BERSON: Sorry to interrupt. Were 3 those considered with a 42 foot depth or with 4 the project projected depth? 5 MS. MOORER: I can't remember if it was 6 each increment -- 7 MR. BAILEY: Each of the project depth 8 alternatives. 9 MR. WILLIS: This is all going into your 10 economic analysis? 11 MR. MOSEBY: Yes, it is. I'm sorry I 12 couldn't answer that. This is done by our 13 team. I have one of my economists, Meredith 14 Hazard doing our analysis on that. 15 My shop of economists, all of them came 16 out of the university. We picked up the jewels 17 out of the economic department in the College 18 of Business at University of South Alabama, and 19 all over the Corps everybody is trying to steal 20 my economists. 21 We pick them up as coops and give them 22 tuition assistance. They work a semester at 23 the Corps. The school -- a semester until they 24 graduate. We convert them to Department of 25 Army interns. 102 1 ECONOMICS STUDY UPDATE 2 The government pays for their salary for 3 two years while we send them to concentrated 4 training. They work on projects as -- as 5 journeyman are working on them on-the-job 6 training. 7 And these guys are really, really sharp. 8 And with Meredith, I mean it's like football. 9 She's the quarterback. Call your plays. Put 10 points on the board. 11 If you need help from the sideline you can 12 come see me, but you've got your senior 13 economist there with you. Y'all work it out. 14 I want you standing on your own feet and these 15 guys are just great. I mean, they're really 16 great. 17 I just hadn't had a chance to get that 18 deep because ever since I've taken over this 19 job, about 12, 13 months now, I've been down in 20 the weeds. I apologize for not being able to 21 answer that, but I know my staff has got my 22 back. 23 MR. DYSART: David. 24 MR. KYLER: I'm responding to what Morgan 25 said. Bernard may want to respond to that too. 103 1 ECONOMICS STUDY UPDATE 2 I'm getting mixed signals here for that. 3 Anybody who listened closely today would agree 4 with me, thank God. We had Bernard saying they 5 decided at a point several years ago, 6 post-Katrina, that they need to clean up their 7 act, which led to the Corps formulation of this 8 new group with different standards. 9 If the self-renewing, self-monitoring 10 continuity that Morgan describes has been in 11 place; why would there be a need for a cleaning 12 up of the act? 13 That would be a natural outcome of this 14 continuous process. So is there or is there 15 not an episodic event which led to 16 self-realization, and if there was, how does 17 that comport with or not, and reconcile with 18 Morgan's rendering of the history of the 19 administration of the Corps -- I mean, 20 fundamentally, illogical. 21 MR. MOSEBY: Well, with Katrina, we think 22 the major problem was we did not communicate 23 the risk, associated with our project, to the 24 people in New Orleans. 25 When the Corps put the project there, 104 1 ECONOMICS STUDY UPDATE 2 those levies, people living behind the levies 3 believed that they had protection. We did not 4 communicate to them that you've got a 5 protection to such and such a level, a 100 year 6 flood, a 500 year flood. 7 Well, what the heck is that? You have to 8 describe that to and communicate that to the 9 people that you're trying to protect. They 10 thought that they were being protected, but 11 everything man builds rots. It has limits. 12 And Mother Nature, we've got 200 years of 13 rot -- well heck, Mother Nature's older than 14 200 years. You're going to be exceeded. She's 15 going to throw a big one at you -- Noah's Ark. 16 We did not communicate that to the people 17 who were being served by our project. All 18 right. That was the biggest thing that we 19 think that we learned from Katrina. There is 20 communicating and risk associated with our 21 projects. 22 That's one of the reasons why the 23 Office of Water Projects Review was 24 established. You know, you always want to go 25 back and look at your glory days. 105 1 ECONOMICS STUDY UPDATE 2 Back there, when we had the Board of 3 Engineers for Rivers and Harbors, we believed 4 that all our reports were good. They did a 5 good job, because we didn't have these problems 6 way back then. 7 Maybe that was the case, you know. So 8 reconstituting that board, but now 9 incorporating the new things that we need to do 10 -- communicating risk. It wasn't about 11 communicating risk back then. 12 You know, we've got this communication 13 thing that we have got to communicate back to 14 our beneficiaries of our project so they know 15 what they have got, what the risk is. 16 The Office of Water Projects Review is not 17 a bad thing. It's a good thing. Maybe from 18 the standpoint of this project, I mean, you 19 know, it's me too; I feel very affected that I 20 spent all this money, and all this time 21 believing the Corps, and they would give me a 22 credible document. 23 And then when I go up, I get slapped down 24 -- redo it all over again. That's illogical 25 maybe from points of view, but it's money, man. 106 1 ECONOMICS STUDY UPDATE 2 It's money sent down the drain. Now we're 3 throwing more money at it, are we throwing good 4 money after bad money. 5 I think it serves a purpose and we need it 6 and we need to do things different. We need to 7 communicate that risk. I think we need the 8 Office of Water Projects Review. It's just 9 unfortunate, at this time, that Savannah and 10 Boston Harbor came up when we had vetted all of 11 assumptions, I mean to anybody who would 12 listen. 13 Go back through the records and all the 14 IPR, all the experts we've met with with the 15 Corps, they say yeah, yeah, yeah. This is the 16 best we can do. We don't have the best 17 technology. We really don't know how they 18 operate. 19 Well we kind of know, but we don't have a 20 model, but it's good enough. Then all of a 21 sudden we get -- we get to be guinea pigs. 22 Boston harbor gets to be a guinea pig. 23 But I think the Corps really needs it, and 24 when it's new you test the water, you feel it 25 out. It will mellow. It will become -- I 107 1 ECONOMICS STUDY UPDATE 2 mean, you know, in the future we'll look back 3 and say those were the good old days. 4 MR. KYLER: Point of clarification, as 5 important as communication is, it's not the 6 Office of Projects Communication. It's the 7 Office of Water Projects Review. 8 So there's more to it than communications 9 obviously. They have new standards for 10 evaluating as well communicating the 11 implications of a project. 12 MR. MOSEBY: Yes, yes. That's a piece of 13 the puzzle. I was trying to relate with 14 Katrina what the thing was. Upper Miss, 15 something else, you know. I'm not going to 16 touch it. 17 MR. DYSART: Morgan. 18 MR. REES: Yes. David, my comments 19 earlier were directed to what I thought your 20 question was; what is there within the Corps 21 process to review and update the procedures 22 that they follow. 23 And that's what I was trying to respond to 24 in saying that there is a continuing, ongoing 25 process, and there is a history of the process 108 1 ECONOMICS STUDY UPDATE 2 to be changed. 3 I didn't mean to imply that there would 4 never be a mistake, and that would never be an 5 individual incident that would change the way 6 of thinking. I think that's impossible goal to 7 try to achieve -- have never made a mistake. 8 So I hope I didn't convey the idea -- 9 MR. KYLER: No, this is like saying -- 10 MR. REES: Wait a minute. Let me just 11 finish. I hope I didn't convey the impression 12 that the process would never make a mistake. 13 MR. KYLER: No, not at all. But to say 14 a process never makes a mistake is kind of, to 15 me, a -- a dubious line of reasoning. It's 16 like Bernard's saying all projections have 17 flaws -- well yeah. All processes have errors 18 -- yeah. 19 But the question is how many, with what 20 implications, how good or how bad are the 21 forecasts compared with the reality? 22 It's not a question of whether they have 23 errors. It's a question of how bad the errors 24 are and what are the consequences of those 25 errors? 109 1 ECONOMICS STUDY UPDATE 2 MR. REES: Well, one of the things I did 3 comment on is we, within the GPA team didn't -- 4 I can't claim this as a thorough, all Corps of 5 Engineer project analysis. But we did look at 6 all of the deep draft harbor studies over the 7 last, I don't know, I forget, 10 to 15 years. 8 And everyone of them had projections lower 9 -- I mean, had actually reality lower than what 10 was projected. That may not be historically 11 true, but -- 12 MR. DYSART: Steve. 13 MR. WILLIS: Yeah. I mean, I think 14 everybody that's been following this, looking 15 at the Everglades, looking at Southern 16 Louisiana, you know, I think you wouldn't have 17 to look far to find a lot of criticism of the 18 Corps methodology. 19 On the other hand, you know, they have 20 been doing a lot of work over a long period of 21 time. A lot of work has been good and 22 successful. I'm not -- you know, I don't think 23 this is the time or place to evaluate the 24 Corps performance in the last 50 years. 25 But I think if you have economic analysis 110 1 ECONOMICS STUDY UPDATE 2 right now that doesn't include the worst 3 economic downturn in 75 years, I would say 4 that's -- I mean, that just is inescapably 5 bogus. 6 So I think we can't evaluate the past 7 performance because it's like Morgan said, 8 people did the best they could and they did 9 okay. But right now, it's not a matter of a 10 hypothetical glitch in the numbers. It's an 11 actual big, change in the numbers. 12 MR. MOSEBY: And I agree.. I agree. And 13 I'll just restate that, you know, you got to 14 take the middle of the path. You remember the 15 1970s when we had inflation -- the rate of 16 inflation was approaching double digits. 17 It was at 9% and the country was going to 18 heck in a hand basket. And people didn't know 19 Jimmy Carter was going to come along and we had 20 20%, 22% inflation. You know, you just don't 21 know what's around the next corner. 22 MR. WILLIS: We know what's going on right 23 now. 24 MR. MOSEBY: Yes, we do know what's going 25 right now, but how long is this going to go on, 111 1 ECONOMICS STUDY UPDATE 2 and what's right around the corner on this 3 thing. 4 MR. WILLIS: The last time it happened, it 5 was 15 years before there was any 6 significant -- 7 MR. MOSEBY: Yeah, well, look at Japan, 8 how long it took them to turn theirs around. 9 And it was embedded in their banking, and 10 things like they didn't have sub-prime stuff, 11 but you know it took them a very long time. 12 That Nikkei Index has not -- has not -- 13 MR. WILLIS: It still isn't. 14 MR. DYSART: Morgan. 15 MR. REES: Yes. My friends nearby me 16 told me I misstated the last 10 or 15 years. I 17 need to clarify and extend my remarks. 18 The predictions that were made in four 19 deep draft navigation studies, over the last 10 20 years or so, the projections -- the reality has 21 exceeded the projections. If I misstated that, 22 there has been more trade than has been 23 projected. 24 MR. DYSART: Are there further questions 25 on this? If not, thank you, Bernard. 112 1 ECONOMICS STUDY UPDATE 2 MR. MOSEBY: Friends, thank you for being 3 with me. I know this is boring, all unsexy 4 economic talk, but I appreciate your patience 5 and your understanding. I hope that all of 6 this time you're invested in listening to what 7 your tax dollars are going towards, I hope you 8 feel, you know, we're trying to do the best we 9 can under the circumstances that we have. 10 We're just trying to be honest brothers 11 and good stewards. Public service has really 12 been rewarding for me, and I love this job, and 13 I love the work I do. 14 I just wish that, you know, in our 15 economic evaluations, you know, it wasn't all 16 dollars. I wish it took more into account 17 other effects. 18 Because for instance, when a man gets 19 flooded, whether he's poor, whether he's rich 20 and he loses all his memories, the poor man 21 suffers just like the affluent man. 22 But with our economics it's hard to 23 justify projects to protect the poor, because 24 the benefits are smaller than when you are 25 dealing with more affluence. But we serve the 113 1 OLD BUSINESS 2 public and we serve you. 3 You have representation and the Corps has 4 an open door policy. Try it. Knock on it and 5 see if it opens. Thank you very much. 6 MR. DYSART: Bernard, you mentioned voodoo 7 economics, and you mentioned taxpayers, and you 8 were talking about money that had been spent on 9 this, and said something about being thrown 10 down a hole or something; the Corps has got 11 Advanced Engineering and Design. 12 Isn't that what AED stands for -- maybe, 13 maybe -- let's put a good face on this. Maybe 14 that was Advanced Economic Stimulation package 15 setting the pace for the new administration. 16 MR. MOSEBY: You need to move to the 17 Beltway. 18 MR. DYSART: I've been there twice. 19 That's enough. Okay. Thank you very much. 20 That was very stimulating. We appreciate the 21 insights that you have provided here. Old 22 business; how about dissolved oxygen injection, 23 Hope? 24 MS. MOORER: The MacTec additional 25 analysis and the TetraTech additional analysis 114 1 OLD BUSINESS 2 had went out to the agencies before the end of 3 the month for your look at it, review, and then 4 we'll provide it to the Corps at that same 5 time, and bring it back here. But I'd like the 6 agencies to be able to take a look at it and 7 then bring it here. 8 MS. BEASLEY: I said don't stop before I 9 get here. 10 MS. MOORER: Oh, so hopefully we'll have 11 it for you at the end of the month. We can 12 probably move to the next item; sediment -- if 13 anybody has any questions on mine, let me know, 14 or send me an e-mail. Bill, sediment quality 15 study update. 16 MR. BAILEY: We're still continuing the 17 work on our sediment quality evaluations. We 18 have an evaluation. We have sent it to the 19 agencies for their comments, and then 20 responding to those comments, so we're 21 continuing to work on that. 22 MS. MOORER: Jason is not here. I thought 23 he would be. Alan Garrett, to let all of you 24 know, to take Dan Parrot's place at the Corps 25 of Engineers. So Alan is no longer our project 115 1 OLD BUSINESS 2 manager. Jason O'Kane, the name you see here, 3 is our project manager now. And obviously, he 4 couldn't be here today. Bill, do you have a 5 schedule update? 6 MR. BAILEY: Basically, the current 7 schedule has the draft reports out for public 8 review this fall and the final next summer. 9 MS. MOORER: Yes. Georgia Ports Authority 10 had requested that the Corps take a look at 11 several periods that we think have extended 12 amounts of time for internal Corps review built 13 into it. 14 We have not heard back yet, from the 15 Corps, as to whether that can be shortened. It 16 didn't have anything to do with the NEPA 17 process review. 18 It had to do primarily with just the 19 periods of internal Corps review before the 20 documents were released, things like that. And 21 we haven't heard anything back from them, or 22 gotten an official schedule revision since the 23 AFB in August. 24 So hopefully, we will receive that soon. 25 When we receive it we will send it out, if it's 116 1 OLD BUSINESS 2 in between meetings and try to get it posted on 3 the website. 4 MR. DYSART: Questions, comments? Okay. 5 How about the schedule update. 6 MS. MOORER: That's what I just gave. 7 Jason is not here. 8 MR. DYSART: Okay -- got to do better than 9 that. Okay. Committee reports; anything from 10 the Aquifer Committee, Beach Erosion? 11 MR. FARMER: Nothing. 12 MR. DYSART: Dredging and Disposal? 13 Judy's not here. Has anybody got anything from 14 the Economics Working Group? Fisheries and 15 Aquatic Resources? 16 MR. BERSON: No report. 17 MR. DYSART: Okay. Interim agenda. I 18 presume you're keeping up with that. Operating 19 Guidelines we've heard from. Striped Bass 20 Committee, Elizabeth? 21 MS. COLVIN: Nothing. 22 MR. DYSART: Anything else? Okay. What's 23 a good working idea of when the next meeting 24 might be; Hope, do you have any suggestions for 25 definitive planning? 117 1 OLD BUSINESS 2 MS. MOORER: I looked at what was due and 3 coming up, and I don't -- with the economics 4 going on, a lot of other -- some of the other 5 work that was pending, ie, air quality 6 analysis, and a relook at the river bank 7 erosion study; both of those are dependent on 8 your fleet forecast and other parts of the 9 economics. 10 And so, until that's done, those can't be 11 completed. So I would suggest that it would 12 probably be wise to have in March an interim 13 SEG meeting, and then in April right now, based 14 on the interim, but try to tentatively schedule 15 an SEG meeting in April. 16 MR. DYSART: Okay. Morgan. 17 MR. REES: The March date is March 7th 18 which is a Saturday. 19 MS. MOORER: That's not good. 20 MR. DYSART: I'll tell you what, y'all can 21 meet whenever you want to. 22 MR. REES: The 3rd. 23 MS. MOORER: April 7th, SEG meeting. 24 That's the first Tuesday. 25 MR. DYSART: Okay. 118 1 OLD BUSINESS 2 MR. REES: Is that 1:00 o'clock or 1:30 on 3 the 3rd? 4 MS. MOORER: On the 3rd, the last one we 5 had at 1:00 o'clock, but we had been typically 6 having them at 1:30. What works better -- 7 1:30? That will be clear of lunch. Okay. 8 An interim on the 3rd at 1:30, and tentatively 9 an SEG meeting on the 7th at 9:00 a.m. -- the 10 same time. 11 MR. DYSART: Okay. Without objection, we 12 will plan accordingly and see what we hear in 13 the next month or so. Anything else for the 14 good of the cause? 15 MS.. LANDERS: Yes. Could I make a brief 16 announcement? 17 MR. DYSART: Yes, Mary, please. 18 MS. LANDERS: I think lots of people here 19 might know Gail Krueger, who was my predecessor 20 at The Savannah Morning News. She attended the 21 meetings in the late '90s and the early 22 century. 23 She has had sad news lately and I 24 thought you might want to know that her husband 25 was diagnosed with a brain tumor just about 10 119 1 OLD BUSINESS 2 days ago. 3 I'm sorry having trouble keeping it 4 together. He died yesterday. He also was a 5 reporter at the paper for a long time. His 6 name was Doug Wyatt. 7 MR. DYSART: Thank you for sharing that. 8 Anything else? We are dismissed. Thank you. 9 10 (Meeting concluded at 12:00 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 120 1 2 3 4 C E R T I F I C A T E 5 G E O R G I A : 6 CHATHAM COUNTY : 7 8 I hereby certify that the foregoing 9 transcript was taken down, as stated in the 10 caption, and the questions and answers thereto were 11 reduced to typewriting under my direction; that the 12 foregoing pages 1 through 119 represent a true and 13 correct transcript of the evidence given upon said 14 hearing, and I further certify that I am not of kin 15 or counsel to the parties in the case; am not in 16 the regular employ of counsel for any of said 17 parties; nor am I in anywise interested in the 18 result of said case. 19 This the 24th day of February, 2009. 20 21 _______________________________ 22 Kathleen Dore, Certified Court 23 Reporter, B-2041 24 25