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KEYNOTE ADDRESS THE IMPORTANCE AND ECONOMIC STATUS OF AMERICA ' S PORTS AND HARBORS Henry E. Soike Throughout the 200-year history of our nation, seaports have grown and developed into centers of population through marine commerce. Port managers believe that their ports--large or small--are unique major business enterprises, producing significant economic benefits for their communities and providing essential transportation services for world commerce. The United States' port industry contributes mightily to our national economy as well, and pours billions of dollars into the federal treasury. In 1978, for example, the activities, direct and indirect, of the nation's deep-draft ports supported more than one million jobs producing personal income of $10.6 billion, and adding $32.1 billion to the gross national product. The same year, these ports generated $11.1 billion in federal revenues, including $5.6 billion from customs duties and $12 million from vessel entry fees. contrast, expenditures by the U. S. Army Corps of Engineers for operation, maintenance, and construction of channels and harbors came to $410.4 million. Adding U. S. Coast Guard expenditures for aids to navigation brings the total to just $690 million. America's ports are a source of considerable profit to the federal government. Moreover, they provide facilities that are readily available for use in times of war and national emergency. Though the U. S. seaport industry's statistical profile is impressive, its greater significance is represented by the essential ~. _ _ _ _, ~ it, _ ~ nature of its service to the nation's transportation system. The United States leads the nations of the world in volume of exports and imports. It is the world's leading supplier of agricultural commodities and manufactured goods. Growing volumes of raw materials are needed to sustain domestic industrial and agricultural production. In all, the ports of the United States annually handle more than one billion tons of oceanic foreign commerce. No one is predicting anything other than a continuing rise in these volumes. The development of the United States' port system depends to a great extent on partnership between public port authorities and the federal government. The assumption of this partnership is that the port authorities build shoreside facilities and the related infrastructure, and the federal government assumes primary responsibility for the construction and maintenance of harbors and 7 By

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r 8 navigation channels. The partnership has been very productive, accruing benefits to both parties and resulting in one of the finest port systems in the world. Recently, however, the federal partner attempted to change the rules. The Carter Administration's water policy reforms, announced in June 1978, call for the states to share the costs of all federal water projects, including navigation projects. Administration spokesmen said the reform was designed to provide for "meaningful involvement" of states in the selection, development, and operation of federal water resource projects. Each state would be required to finance five percent of the cost of non-vendable inland and deepwater navigation projects. A very rough formula was proposed for apportioning state shares on multistate projects. These proposals were embodied in cost-sbaring legislation introduced in the 96th Congress. After hearings in both the House of Representatives and the Senate, no action was taken. The proposals became embroiled in a general water-policy debate and in the Omnibus Water Resources Projects Bill. Faced with opposition to legislated cost sharing, the Carter Administration tried other approaches. As part of the President's water policy review, 11 criteria were established for decisions on funding of water projects and on their authorization in appropriations bills, including the selection of new planning and construction starts. Criterion 6 states, "Projects will be given expedited consideration where state governments assume a share of costs over the above existing cost sharing. Besides this subtle pressure to expand cost sharing without Congressional approval, the Corps of Engineers recently began to require sponsors to agree in principle to future five percent cost sharing for new or modified navigation projects. Port managers are opposed to the legislative proposals and to pressures to institute cost sharing. Our ports are national assets, and it is only fitting and proper that the federal government continue to bear the full responsibility for navigation projects. Cost sharing would create inequities. To raise the funds necessary to meet their share of the costs of navigation projects authorized by the Corps of Engineers, states, by necessity, would be forced to draw upon their own tax revenues. Those taxes would fall on the state's own resources. The states cannot recoup these costs from the broad range of port beneficiaries. State taxation of port traffic is effectively precluded by the Constitution, which forbids the levying of imposts or duties on imports or exports without the consent of Congress. On the other hand, should a state, for whatever reason, be reluctant or unwilling to allocate tax resources to navigation projects, the burden would necessarily fall on the ports themselves. The wealthier ports might well be able to bear it, although port authorities for whom marine operations are marginal or unprofitable might be obligated to draw on revenue generated by other activities, such as airport operations. The result would be to impose an unfair burden on users of airports or whatever is taxed. Ports that lack the financial means of supporting needed navigation improvements would have to do without, thus placing them at a disadvantage to their more affluent rivals. Cost sharing in this instance would have the

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9 obviously discriminatory effect of favoring some ports at the expense of others. Under these circumstances, cost sharing would contravene the long-standing federal policy of neutrality in matters affecting interport competition, and clearly violate the constitutional stricture that, No preference shall be given by any regulation of commerce or revenue to the ports of one state over another.. Public port authorities in the United States operate very close to the margin. Many barely break even, or fail to cover costs entirely. They, too, are hard pressed by inflation. A recently published report of the National Transportation Policy Study commission projects that under conditions of medium growth, the capital investment requirements of the ports, harbors, and facilities of the United States serving international marine transportation will total S12. 9 billion {in 1975 dollars) between the years 1976 and 2000. Of that sum, S9.4 billion will have to come from state and local governments, including primarily public port authorities and private facility operators. That is the investment that will be required to provide the docks, terminals, and equipment needed to accommodate our international commerce. Problems in financing facilities and cost sharing are compounded by the intractable delays in granting dredging permits, and by denials of approval for berth maintenance and new port projects. Tbese delays are costly to port interests, shippers, and to foreign trade and national security interests. The effect of dredging delays can be well illustrated by some of the problems confronting coal exports. Over the next 20 years, coal exports from the U. S. are projected by the World Coal Study {WOCOL) to increase from two to six times the 1979 level of 59 million metric tons. But our existing port capacity is insufficient to load that much coal. A particular problem is the draft restrictions at the major coal-loading ports of the United States. Large coal-carrying bulk ships of 100,000 tons or greater, such as those that will enter international coal trade, draw 50 feet or more of water. The present controlling depths at mean low water of the main channel approaches to the major coal ports of Philadelphia, Baltimore, and Norfolk are 40 feet, 42 feet and 45 feet, respectively. Deeper draft vessels, those with greater carrying capacity, must move out at high tide or leave the ports partially loaded. Shippers confronted by the heavy cost per ton of transporting coal over long distances can be expected to turn to ships that yield maximum economy of scale. As has been borne out by experience in the crude oil trade, the use of very large ships can mean rather substantial savings in transportation costs per ton. A few extra inches in draft can mean the difference of several thousand tons of carrying capacity. Adding a foot or more can make a substantially greater difference. In these circumstances, shippers are bound to employ, where practical, the largest vessel that can be accommodated at the ports where coal is to be delivered. At least ten ports in Europe and Japan are now capable of receiving coal ships with a maximum capacity of 145,000 DWT or more, vessels far larger than any that can be fully loaded today at the ports of the United States. There are modern loading ports in Australia, Canada, and South Africa, all of which are major coal exporters, capable of

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10 handling vessels in excess of 200,000 DOT. Foreign customers have made it clear that if the draft problem of ports in the United States is not resolved satisfactorily, they will go elsewhere for their coal. Despite mounting evidence that coal exports could make a very substantial contribution to this country's position in world trade, major port-deepening projects that would directly affect major coal ports, such as Baltimore and Hampton Roads, have been held up by budgetary considerations, problem. in securing permits, and prolonged legal proceedings. Ports in the West are now being evaluated for coal export to Pacific Rim nations. The Port of Grays Harbor that ~ manage has an excellent site that can be developed to handle unit trains from rail carriers that operate from the major coal fields in the West. Nevertheless, after 14 years of effort, we too lack the necessary deeper draft capability. If this nation is to maintain its primacy in international trade, it is essential that port-deepening projects clearly in the national interest should be speedily authorized and completed. Managers of ports recognize the critical need for adequate navigation facilities to assure safe transit of ships that yield maximum economy of scale. The consideration of adequate harbor and port entrance design by this group is most timely, and can result in improvement to the economic well-being of our nation.