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Port Wars
A battle ensues over Jasper County site
By Shelia Watson
Contributing Writer
In anticipation of ongoing increases in cargo volume, many ports, especially East Coast and South Atlantic ports, are building or planning new facilities.
To help increase capacity, many of these ports have purchased new cranes and other equipment within the past year or have plans to do so in the near future.
Several factors are driving cargo volume increases. Among them:
• The development of distribution centers by big retailers to serve their customers on the East Coast.
• Foreign direct investments in the Southeast and their impact on international trade.
• Increase in imports from China, coupled with the introduction of the Suez trade route, which allows super-post-Panamax size vessels to make East Coast calls.
• Diversion of cargo from West Coast ports due to fears of a repeat of congestion there during the past few years.
However, purchasing new and updated equipment can meet only a fraction of the needs, particularly when market demand is so high.
The South Carolina State Ports Authority is currently in the process of expanding onto the former Charleston Naval Complex. The hearing phase of the Army Corps of Engineers’ Environmental Impact Study has begun and, assuming all goes well, the permitting phase is expected to begin in August 2006.
In addition to the naval complex expansion—and citing a compelling market demand for new port capacity—the SPA board voted earlier this year to begin the process of acquiring property in Jasper County on the Savannah River for developing a public seaport.
The resolution to acquire the Jasper site authorized the initiation of condemnation proceedings, if necessary, because the Georgia Department of Transportation owns the large tract on the South Carolina side of the Savannah River.
The SPA also invited private participation for both expansion projects and, to date, has received 11 responses from ocean carriers and marine terminal operators that wish to remain involved in South Carolina’s port expansion projects.
The Request for Expression of Interest was broad, “seeking private sector interest in participating financially in terminal design and development and operation of either or both” of South Carolina’s major port expansion projects.
In June, the SPA board unanimously reaffirmed its commitment to the competitive process and held informational meetings with those interested parties to detail the two projects.
While the Charleston expansion is somewhat ahead of the Jasper project, the SPA intends to move both projects ahead on parallel courses.
The battleground
The SPA is not the only organization interested in the Jasper site. Jasper County officials have plans to build a $450 million container terminal under a private-public partnership with SSA Marine of Seattle on a 2,556-acre tract of land along the Savannah River.
“When I came on board, I hired a consortium of professionals to review the arrangement Jasper (County) and SSA Marine were negotiating to ensure it was a good deal for Jasper County,” said Andrew Fulghum, Jasper County administrator. “That was the due diligence I had to complete before recommending County Council enter into the agreements.”
Fulghum said there are three separate agreements with SSA Marine—a loan agreement, a development agreement and a management agreement. Under the loan agreement, SSA Marine will loan $15 million to Jasper County to gain control of the property.
“It’s written as such that if we’re unsuccessful, the loan is forgiven. The basic scenario is that Jasper would condemn the property and SSA would lease it from us to develop it.”
However, development will not be possible until a series of lawsuits are settled regarding who owns the property and who has the legal right to build and manage the facility.
State vs. county vs. state
The proposed site is currently owned by the Georgia Department of Transportation, which, as the local sponsor for the Savannah District of the U.S. Army Corps of Engineers’ dredging project, uses the site for storing dredging spoils.
Jasper County began eyeing the property several years ago as a possible location for a marine terminal, hoping it would be an economic boost for one of the poorest counties in the state. SSA Marine’s deal with the county was based on the latter’s ability to condemn the property.
Jasper County was successful in circuit court in 2003 regarding condemnation of the site, but the S.C. Supreme Court later overturned the circuit court’s opinion, saying the lease arrangement did not pass the public-use test for eminent domain.
Earlier this year Jasper County offered to purchase the property from Georgia for $8.5 million and gave a reasonable amount of time to consider. When Georgia did not respond, Jasper filed for condemnation of the land. And the lawsuits began, with Jasper County in the middle of three lawsuits.
“The first was when we sued Georgia to condemn the property,” said Fulghum. “Then they filed a counter-suit against us protesting the condemnation. That one is still at the circuit court level. They also filed in federal court with an argument against condemnation because they have a contract with the Army Corps of Engineers, who manages the spoil site with them. Then we filed to dismiss the case because we felt it was not the best venue. The judge did not grant to dismiss, although he suggested the issue was political not legal.”
In the meantime, the SPA filed a lawsuit claiming rights to condemn the property as the agency charged with developing ports in the state. The case went directly to the S.C. Supreme Court, which will issue a “first decision,” with no appeal. The other cases were put on hold until the S.C. Supreme Court renders its decision.
The Supreme Court will rule on whether the SPA has exclusive rights to develop marine terminals in South Carolina, whether the SPA has superior rights to condemn property and whether the injunction against Jasper County will bar the county from attempting this in the future.
In the meantime, the GDOT has sued both Jasper County and the SPA, challenging the authority of both to condemn the property. Georgia’s governor also announced recent executive appointments to the Jasper Port Study Committee, which was created in the 2005 legislative session. The committee will study several factors, including environmental concerns and federal regulations, to examine the feasibility of creating a joint port in Jasper County.
Officials from both Georgia and South Carolina met earlier this month for the first Jasper Port Committee meeting, looking into whether a port can be built and what effect that could have on the Georgia Ports Authority in Chatham County.
County-SPA potential
With so much riding on various legal decisions, there is time to ponder why Jasper County officials simply didn’t go to the SPA for assistance. Fulghum, who has been on the job a little more than a year, said his predecessor went to the SPA many times and was turned down.
“My understanding is that the ports authority thought Jasper was a poor site. I think they linked the idea that too many infrastructure requirements were needed,” he said.
Andy McLauchlan, senior vice president of business development and marketing with SSA Marine, agreed.
“For 10 years Jasper County has gone to the ports authority and has gotten a response of ‘No, we’ll focus on Charleston.’ So in an effort to move forward, we’ve been working with Jasper to develop this project and gain rights to it.”
However, SPA spokesman Byron Miller pointed to the SPA board’s decision earlier this year to pursue the Jasper alternative.
“There’s a huge market demand these days. Time doesn’t stand still,” he said. “Things change. This is an area we’re looking at now.”
In fact, records show that Jasper has always been considered an alternative for port expansion. In 2000, after the Daniel Island site was discarded due to public opposition, the Jasper site was again brought forward for consideration.
“To satisfy the demand projected in this forecast, preparations must begin immediately for new terminal development,” said then-board Chairman Eddie Buck. “It’s understood that we must move forward with plans to expand our state’s primary port in Charleston. It is no longer a question of ‘if,’ or even ‘when,’ but ‘where?’”
In addition, a 2002 legislative audit on the SPA’s expansion plans refers to the Jasper County alternative.
The authority of the authority
The primary issue in the lawsuits centers around the SPA’s specific power. Created by an act of the General Assembly to promote commercial cargo, the SPA is engaged in promoting, developing, constructing, equipping, maintaining and operating the harbors or seaports within the state.
Specifically, the SPA owns and operates public port facilities in Charleston and Georgetown under authority of 1942 Act No. 626 of the S.C. General Assembly.
The SPA is considered an “operating” port and employs a “common user” business model that allows interchange functions, crane and yard equipment operations, and yard supervision and planning to be performed by SPA employees.
The SPA maintains that such a model provides an efficient use of facilities and equipment that results in high productivity and customer service. The model also allows the easy implementation of new technology and operating techniques. Private companies employing their own labor handle the stevedoring functions.
The SPA also licenses areas within its terminals to steamship lines, allowing them to manage their own gate and yard functions. The steamship lines may not solicit third party business but are allowed to handle their contracted partners’ cargo. The SPA maintains ownership and operational control of all container-lifting equipment, which is referred to as a “licensed user” model.
Such an arrangement is not unusual. Aaron Ellis, spokesman for the American Association of Port Authorities, said “Ports are a public entity, and private companies cannot own them, although private businesses often operate them within the public’s jurisdiction.”
Private-public issues
While the state Supreme Court decides whether to uphold the SPA’s mandate, other issues regarding privatization are still not certain. And although privatization is a popular strategy, it is not the only option for a port.
In their role as gateway of people and goods entering a nation, ports have traditionally been run by a government entity. One of the questions is how well a private company will be able to work with government agencies such as the Department of Transportation for infrastructure issues, the Army Corps of Engineers for dredging and harbor deepening issues, and the Department of Homeland Security and Customs/Border Patrol for security issues.
For instance, an agency such as the SPA has strict guidelines for accountability, such as compliance with a Freedom of Information Act request, that a private company is not bound to.
In addition, funding for various projects operates differently in the private sector.
Homeland Security money is available for private companies operating in certain cases but only on a matching-funds basis. Publicly operated ports receive the full amount of funding.
The typical battle cry for privatization—“no taxpayer money used”—is also moot, as the SPA is financially self-supporting.
Modeling port expansion
If Jasper County had such concerns over privatization, they did not prevent inking a deal with SSA Marine. In 2000, SSA Marine signed a 99-year lease with the county to develop and operate the site. That same year the company signed a 90-year lease with Texas City to develop and operate a port in southeast Texas.
“We have a project in Texas City, south of Houston, that could be a model for what we could do in Jasper,” McLauchlan said. “We will create jobs and economic benefits for the county and will create competition in the state and the region, a very balanced competition.”
However, creating economic benefits is more difficult in implementation than on paper.
The site in Texas City is far from complete, and in an article in Gulf Shipper magazine in September 2004, the site is referred to as “the off-again, on-again Texas City International Terminals south of Houston that remains little more than a gleam in SSA Marine’s eye.”
With the state Supreme Court decision expected soon, it is hoped by all parties that the issue will be resolved and additional port capacity in the works soon.
The SPA has met with Georgia officials about acquiring the site, although those discussions have not yet resulted in an agreement. The SPA remains open to a negotiated resolution, and it is optimistic it can reach agreement that will be beneficial to both states. Fulghum said Jasper County also remains open to working with the SPA.
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