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By Molly Parker
mparker@scbiznews.com
Published May 11, 2009
A senior railroad executive said the Port of Charleston is at risk of falling further behind its competitors if it doesn’t find a solution to give both Norfolk Southern and CSX competitive access to the Port of Charleston’s customers.
“The issue is really a port issue,” said Rob Martinez, Norfolk Southern’s vice president of business development. “Is Charleston going to be competitive in the long term, or will it become a port of second order on the Atlantic?”
In a three-part special online report, the Business Journal took an in-depth look at the complicated debate about how to provide service to both of the region’s Class 1 railroads. The report will be updated online as the story develops.
Leading Senate lawmakers recently offered Veterans Terminal to North Charleston Mayor Keith Summey in exchange for his allowing rail lines to run through the heart of a years-long effort to redevelop his city.
Summey declined, saying his position is not for sale.
The lawmakers wanted Summey to allow Norfolk Southern to access the former Navy base property through the northern end. But that line would run through the middle of the Noisette Co.’s planned live-work community.
The offer would take Veterans Terminal away from the S.C. State Ports Authority and give it to North Charleston.
“I’m interested in Veterans Terminal,” Summey said, “but not at the cost of everything else we’ve done.”
Summey said he recently sent word to the Senate lawmakers who had offered to orchestrate the deal — he declined to name them.
Those pushing for a compromise say a solution is vital to the well-being of the Port of Charleston and the economic health of the entire state.
The Veterans Terminal offer is one moving piece in a complicated debate involving rival railroads, a 7-year-old memorandum of understanding, legal threats, a proposal for a new maritime facility on Charleston’s upper peninsula and legislative wrangling designed to gain the upper hand.
“It is a colossal mess, is what it is,” said Rep. Jim Merrill, R-Daniel Island.
Merrill recently sponsored an amendment to a House bill — much to Summey’s chagrin — naming S.C. Public Railways as the property owner of the railroad that runs onto the former Navy base. A city-backed residential and business development is planned for the land, in addition to the container terminal. Sen. Larry Grooms, R-Bonneau, attached a similar amendment to the budget bill in the Senate.
Merrill and Grooms said that their intent was misunderstood and that the amendments are meant to provide the option of northern rail access — but not meant to force it there.
“I think some people are reading into this and hyperventilating way too early,” Merrill said.
But it prompted Summey, who called it a “slap in the face,” to lash out in a lengthy opinion piece on his city blog. That turned up the heat on the brewing debate.
The mayor has sent a letter to the Army Corps of Engineers asking the agency to halt construction on the terminal because northern rail access would be in violation of a memorandum the city and SPA penned in 2002. In that memorandum of understanding, the SPA agreed to “use rail access exclusively from the south end of the property.”
The SPA has thus far remained silent on the debate, pointing to the state law that directed the terminal to the Navy base after the Global Gateway project failed. The decree called for the SPA to build the new terminal and for the S.C. Department of Transportation and S.C. Public Railways to facilitate road and rail, respectively.
Interim SPA Chief Executive John Hassell said the state agency cannot take a stand because the Corps of Engineers has informed him that doing so will reopen the environmental impact statement that allowed for construction of the new terminal.
Should that happen, Hassell said it could delay the 2014 opening of the terminal — a date that coincides with the targeted completion date of the Panama Canal expansion.
“Our message to the marketplace has to be that we are building a new terminal and that it’s going to be online by 2014,” Hassell said.
Summey said that he would like for the city to own Veterans Terminal but that he will not accept it as part of any quid pro quo offer that requires him to allow northern rail access. He said there is no carrot large enough to lure him from that stance.
“I will fight it with every breath I’ve got, and my council is online to do the same,” he said. “There is a way it can work in the south end.”
Summey says a potential solution is to utilize the Macalloy property in North Charleston as a rail yard for CSX and the Ginn property on Charleston’s upper peninsula as a rail yard for Norfolk Southern. This is the proposal that local developer Robert Clement has pitched for providing dual railroad access. Shipyard Creek Associates, of which Clement is a part, has a financial stake in both properties. And the holding company Lubert-Adler, based in Pennsylvania, is the financial backer of both properties.
But neither S.C. Public Railways nor Norfolk Southern is keen on the idea. They argue it would wreak havoc on downtown traffic, cost far too much and still leave Norfolk Southern at a competitive disadvantage.
Clement defended his proposal against these early critics, saying his plan for dual intermodal facilities in the Neck area will “put Charleston on the map.”
The development and financial team for these properties believes so strongly in this project, he said, that it is willing to share a portion of the buildout costs with the state of South Carolina or the SPA.
“With the enormous cost and the state of the economy, we think it is going to require an all-hands-on-deck approach,” Clement said.
The plan to create a rail yard for CSX on the Macalloy property has been in the works since 2005.
John Koch, director of CSX’s international sales and marketing, said the company did not have an opinion on the other plans in the works.
“All we are trying to do is the right thing, and we’ve tried to listen to all of the constituents over time and created a product,” Koch said. “CSX developed a plan that did not infringe upon some of the things that the other plans infringe upon.”
State lawmakers and Summey both believe the law is on their side, should the need arise to invoke it.
“We’re very comfortable that, if this were to be litigated, we believe we would win the legal right to send trains out of the northern end of the base,” said Grooms, chairman of the Senate Transportation Committee. “I’d rather not do that, but if that’s the only option to protect the economic well-being to the entire state, I think we’ll have to do that.”
Summey said he’s prepared to fight as hard as necessary to keep rail out of the northern end.
“They can play any game they want, that’s fine with me, but they better be able to play an extra-inning ballgame, and they better be ready to play some hardball,” he said.
Reach Molly Parker at 843-849-3144.
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