Ports & Terminals

Kentucky Freight Summit Addresses Riverport Needs

The Kentucky Summit on the Economic Role of Freight Modes, hosted online by the Kentucky Transportation Cabinet November 16–18, is the first of three conferences planned by the state to help its riverports grow.

The state began its Kentucky Riverports, Highway and Rail Freight Study at the first of the year, and the conferences are the next step for using the information gathered in the study to create a strategic map for the future.

“This initiative will allow us to better capitalize on our opportunities by identifying how to best to enhance our riverport assets, capture additional revenue streams and optimize the flow of freight across all modes for a positive return on investment,” Michael Pelfrey, director of the Kentucky Transportation Cabinet’s division of planning, said in the opening session.

The goals of the planning efforts, led by contractor Metro Analytics, are to include a unified economic development strategy as well as what organizers called a toolkit for each riverport.

“Together we feel we’ll have a strong case for both business recruitment and retention for those in freight, manufacturing, producing and distribution,” Pelfrey said, adding that the efforts will also support additional economic development initiatives across the state.

Brian Wright, president/CEO of the Owensboro (Ky.) Riverport Authority, noted that Kentucky’s hundreds of miles of Ohio River bank are underutilized. The study and conferences should help participants to determine how to attract industries to Kentucky using its riverports, he said.

“Through this study we anticipate we that we’ll gain a better understanding of not only industrial development opportunities associated with riverports and communities but also freight commodities that move around and up through Kentucky from all across the nation,” Wright said.

That should help those involved to learn better ways to utilize the system long-term, he said.

Chandler Duncan, vice president of Metro Analytics, said organizers are already using information they learned from site visits and feedback they have received so far to think about potential changes and future opportunities.

“Today’s discussion is really going to set the groundwork for a lot of what we do,” he said.

The research must begin by understanding the market and how it is currently being served by the riverports, Duncan said, posing the question, “What do we believe our needs are, and what do we believe our infrastructure can do right now? He listed some of the study’s tasks as determining the existing role of Kentucky riverports and freight in the economy, forecasting future trade volumes and performance implications and engaging stakeholders on future needs and opportunities.

“We will learn what competitors and the world around Kentucky are doing so we can make the right investments to be competitive,” Duncan said.

Ultimately, he said, Metro Analytics will develop a roadmap to success that includes investments, impacts, supportive policies and possible growth trajectories.

“We will include a final report and port-by-port summary as well as a marketing toolkit with strategic, educational and promotional elements,” he said.

Between 40 and 80 people attended the seven various sessions, on average. The session recordings will be made available online at https://transportation.ky.gov/MultimodalFreight/Pages/Kentucky-Riverports%2C-Highway-and-Rail-Freight-Study.aspx.

Ports And Freight Movement

A session on the state of Kentucky’s ports drew more than 70 participants. Ken Eriksen, senior vice president of IHS Markit’s agribusiness area and head of client advisory and development, energy and transportation policy, went into detail about site visits at 10 of Kentucky’s 11 riverports in September and October. The Port of Northern Kentucky was the only one that did not participate, he said.

Of the state’s ports, seven are classified as active and four as in development. Site visits included interviews with riverport authority directors and key team members, during which study managers confirmed basic metrics and sought to gain an understanding of each riverport’s history, needs and competitiveness, Eriksen said.

The study also looked at how many counties each riverport can reach in a 90-minute drive, including nearby counties in Illinois, Indiana, Missouri, Ohio, Tennessee and West Virginia. In some cases, Eriksen said, riverport market reaches overlapped.

The site visits were complicated by COVID-19 precautions, which themselves caused stress on the riverports and their customers as supply chains had to make quick adaptations.

“That was moving away from a waterborne process that was very fuel efficient, but it was not adequate enough to address what the consumer behavior was in the marketplace,” Eriksen said.

On the positive side, Eriksen noted fewer hands touching commodities that move along the waterways “and that gives us that natural social distancing that the inland waterway system offers every single day.”

In looking at the pandemic’s impact on the total commodities moving on the inland river system, riverport directors consistently reported fallen volumes, especially in coal shipments, and that was also reflected in the most recent monthly data from the Corps of Engineers.

“Coal had been a long-term downward trend, and that was the general theme everywhere I went and in the discussions that we had, and to see it come back is going to be very challenging,” Eriksen said.

He also noted that chemical shipments have also been hard hit and that the loss of volume in petroleum shipments in both crude oil and distillates “has certainly been devastating” as fuel consumption has dropped precipitously.

“The only bright spot that we see out there is the farm and food products,” Eriksen said.

He pointed to the Asian market in particular as an indicator.

“China is buying so many soybeans and so much corn and anything else that may be consumed to buy or put into a hog or chicken, and they are growing their herds really fast,” Eriksen said. “Last night I heard astounding numbers. We’re going to have record grain and soybean product exports here this year and possibly next year, and over 60 percent of that volume moves down the inland river systems and is exported to the U.S. Gulf. Of that volume in the Gulf, more than 95 percent arrives in a barge.”

Key themes Eriksen said kept coming up in talking to riverport directors were appreciation for what was seen as a long overdue study and for an annual $500,000 grant matching program Kentucky makes available for riverports. However, Eriksen said, directors said  that those funds are limited and distributed across riverports so that it is difficult to obtain a sizeable, continuing funding level for capital improvements. The current funding level limits extensive investment opportunities, as does a rule that requires that funds be used during the fiscal year with no carryover.

Several directors also made comparisons to state port structures in neighboring states, including Indiana and Ohio. Eriksen noted those states have different funding and organizational relationships with their public riverports. Many of Kentucky’s riverports envision the Kentucky Transportation Cabinet eventually coordinating and leading efforts with the Kentucky Cabinet for Economic Development to represent the interest of Kentucky’s waterways and riverport infrastructure.

That infrastructure, for the most part, was built during and for a previous era, Eriksen said.

“Among the ports there is a collective identification of need and desire to modify the infrastructure,” he said.

Additionally, he said, some riverports sold waterfront land in the past, and that has made for disjointed ports.

In a session on reviewing freight movements in the market, Paul Bingham, director of transportation consulting with IHS Markit, looked at the market reach of each port and individually went over a list of potentially divertible freight to it.

“This would be the freight not currently handled by the Kentucky riverports that is already in the marketplace that potentially could be [handled by the riverports] in the future under the right scenarios or conditions,” Bingham said.

Some ports had more opportunity with coal or petroleum products, even though the amount shipped is declining on the whole, Bingham said. Others had the potential to carry more primary iron or steel products, plastic materials or synthetic fibers, organic or inorganic industrial chemicals, Portland cement, broken stone or riprap, grains or gypsum products.

Because rates increased for intermodal traffic on rail, in particular, amid the COVID-19 pandemic, Bingham said, “You’ve got shippers looking for opportunities they may not have considered in the past.”

He noted that although much of this freight is traveling by truck right now, some companies may have identified more flexibility and be willing to consider shipment by barge now.

Economic Development, Funding

One session at the virtual conference allowed participants to provide information about their economic development efforts by breaking into smaller group sessions and then giving feedback. Kristina Slattery, executive director of the Office of Business & Community Services of the Kentucky Cabinet for Economic Development, and Kevin Johns, economic development specialist with Metro Analytics and former director for economic development for Austin, Texas, led the session. It also provided information on existing economic development incentive programs and performance measures as well as available resources.

A session on funding options, opportunities and peer comparisons included presentations by Deb Calhoun, senior vice president of Waterways Council Inc. (WCI); Jimmy McDonald, freight practice leader and senior maritime consultant with Metro Analytics; and Chad Dorsey, director of the U.S. Maritime Administration’s (MarAd) Inland Waterways Gateway Office in the Paducah (Ky.) Office of Maritime & Intermodal Outreach.

Calhoun’s remarks included WCI’s advocacy efforts, including direct lobbying of Congress, grassroots support and media and communications efforts. She also reviewed the proposed Inland Waterways Trust Fund cost-share arrangement in negotiations as part of the Water Resources Development Act, which she continued to expect to be passed in Congress’ lame duck session.

In reviewing recent years’ congressional appropriations and operations funding, she showed that it has continued to be well above the amount included annually in the president’s budget request.

“This is a really good news story,” Calhoun said. “This is the direction we want to see this going.”

In looking at unscheduled lock closures, Calhoun noted that there were fewer than in any years since 2005.

“The money is going where it needs to go, and the Corps is managing the system as efficiently as it possibly can,” Calhoun said. “We like to see these numbers and this direction.”

She also noted a new data source for information, the National Waterways Foundation’s State Waterways Profiles at www.nationalwaterwaysfoundation.org, noting it also could be a great source for state legislators to be aware of information already gathered about the state and surrounding states.

Dorsey talked about federally available funding through the U.S. Department of Transportation, noting that the same programs are expected to be available in 2021. They included the Better Utilizing Investment to Leverage Development (BUILD) grants, Infrastructure For Rebuilding America (INFRA) grants and the Port Infrastructure Development Program (PIDP). The last of these programs is a newer program, which had funding in 2019 and 2020 and was originally for coastal seaports before being opened up to application submissions from the inland waterways.

“That is a fantastic grant program to apply to from the inland perspective,” Dorsey said, noting that it is less proscribed and more directed to port infrastructure.

Dorsey also went over the America’s Marine Highway program and associated potential grant opportunities, noting the success of Nucor Steel receiving funding through the program for its facility in Gallatin County as well as for its facility under construction in Brandenburg as well as a container-on-barge study project for the Port of Paducah-McCracken County. The program does not provide grants for bulk cargo currently, but that is a possible legislative change proposal to be considered.

“The benefits of this program are to get trucks off the road and bring freight to the waterways,” Dorsey said, adding it also promotes the natural environmental friendliness and fuel efficiency that comes with using waterborne transportation.

Finally, Dorsey also briefly highlighted MarAd’s Port Conveyance Program and its Small Shipyard Grants program as well as Build America Bureau funding options.

McDonald went over state funding available in Kentucky directly for public ports, including the Kentucky Riverport Financial Assistance Trust Fund, which can receive state and federal funds, contributions, gifts and donations, and Kentucky Riverport Improvement (KRI) funds.

He reviewed funding programs available in neighboring states as well as coastal programs available in Virginia and in Florida, which has a port-specific program that he said could potentially provide some best practices to look into. He also highlighted Ohio’s Maritime Assistance Program and Illinois’ Rebuild Illinois Fund, which included $150 million in appropriations for Illinois ports, including recently including $40 million allocated in 2020 to fund a new port in Cairo, Ill.

“This is an enormous statewide investment,” McDonald said of the Illinois program, but noted that the program sunsets in six years and includes multimodal funding that is split several ways.

McDonald also conducted a poll to see the largest challenge to taking advantage of grant programs. Participants answered that it was meeting the matching requirements of the grant programs.

Port Interactions And Logistics

A final topical session on port interactions and logistics was led by Mike Steenhoek, executive director of the Soy Transportation Coalition, and Amanda Coates, commercial import manager of the Port of New Orleans.

Steenhoek noted that the Mississippi River and its tributaries provide 14,500 miles of inland waterway connectivity for freight shipments.

“Farmers realize of all the things that are planted and grown in the United States, the agriculture product that is exported more than any other is soybeans,” he said.

He noted that one, 15-barge tow can contain 787,500 to 855,000 bushels of soybeans, the equivalent of 219 railcars or 940 tractor-trailer rigs.

The main U.S. competitor to soybean exports is Brazil, Steenhoek said, but he noted that the United States is more competitive primarily because Brazil moves most of its product by truck instead of using lower-cost shipment via the waterways, a U.S. benefit.

Steenhoek also gave an overview of two projects along the rivers that he expects will impact Kentucky farmers and the riverport terminals that serve the agriculture industry.

First, he spoke about the work that began September 11 to deepen the Mississippi River Ship Channel between Baton Rouge, La., and the Gulf of Mexico to 50 feet. The first phase of the project, 154 miles extending from the Gulf of Mexico through the Port of New Orleans, is expected to be completed by fall 2021. Eleven of the 14 soybean and grain export facilities are located along that stretch of river, Steenhoek said.

Because of improved efficiencies that come along with deepening the channel, Kentucky soybean farmers are expected to receive $11.5 million more per year for the value of their soybeans, post-dredging, Steenhoek said. Overall, U.S. soybean farmers are anticipated to receive a total of $461 million more per year, as long as there are no major changes in supply and demand.

Steenhoek also spoke about the American Patriot Holdings (APH) container-on-vessel project which he said is at best two years away.

“The question we’re asking from that is to what extent can farmers benefit from that on the back end of the long-haul movement?” Steenhoek said.

He noted that APH plans two types of vessels, both running on liquefied natural gas and able to move upriver at 13 mph., vs. 5 mph. on a regular upriver tow. A larger vessel would have a capacity of 2,375 TEUs and would travel between a container terminal in lower Plaquemines Parish in Louisiana and ports in Memphis, Tenn., and St. Louis, Mo. A smaller vessel that can transit locks on other waterways would have a capacity of 1,700 TEUs. Steenhoek said he could easily see that vessel delivering containers to Louisville, Ky., or to Joliet, Ill.

“There is an interest in moving agricultural products like soybeans via container,” Steenhoek said.

Although the majority of grains continue to be moved via bulk shipping, Steenhoek noted that Archer Daniels Midland is already moving grains by container from its Decatur, Ill., facility. He believes containerized grain shipping will continue to grow as it is an increased preference of customers.

Steenhoek also pointed to a Soy Transportation Coalition feasibility study, which found significant savings resulting from all-water routing of containerized grains.

The study showed the cost per metric ton of shipping soybeans from St. Louis to Shanghai, China. It calculated that shipping by barge via the Mississippi River and Gulf of Mexico costs $79.80 per metric ton, intermodal via rail through Los Angeles/Long Beach to cost $140.33 per metric ton and by American Patriot Holdings through Plaquemines Port to cost $87.07. However, he said, APH’s system is expected to be 14 days faster than barge via the Mississippi Gulf and six days faster than intermodal rail, and so any additional cost is offset because shipments will be significantly faster, allowing more shipments per year than by other methods.

In her portion of the session, Coates said the timing couldn’t be better for the dredging and the container vessel shipping projects as the Port of New Orleans has $100 million in construction ongoing and expects four new cranes to become operational by next summer. She also stressed the continuing focus on container-on-barge to Memphis, St. Louis and Port Allen, La.

Coates also commented that the Port of New Orleans is happy to facilitate any freight connections in the New Orleans area that any Kentucky riverports may need.

Next Steps

In the closing session, both Duncan and Jeremy Edgeworth, freight, rail and waterways coordinator and Kentucky Transportation Cabinet project manager, thanked those who logged in to attend the summit.

After notes and materials from the summit are finalized, they will be incorporated into the study results to provide a summary of the existing role of Kentucky riverports and freight in the economy, forecast trade and utilization of ports and use this information to re-engage stakeholders through another round of Kentucky public riverport visits, focusing in on each port’s needs and opportunities.

A second summit, titled Economic Change and Kentucky’s Transportation Infrastructure, is tentatively scheduled for sometime in February. Duncan said he anticipated that summit will be very forward-looking and seek to answer questions such as: “What are the growth markets for the riverports? How might changes in the economy lead to modal conversion [to using riverports]? What are some of the things we can do that might relate to that? What are other states doing? What is Kentucky’s vision, and what are some opportunities we have that might be able to move the needle for Kentucky?”

He promised, “We’re going to have a lot more strategic discussion,” reminding attendees that even though this particular summit was concluding, “This is not the end. It’s the beginning.”