- Report Published -
|Alternative Methods of Funding the Deep Draft Anchorage Project, Port of Hampton Roads|
|Virginia Port Authority|
|Appropriation Act - Item 526 E (Regular Session, 1997)|
|The Port of Hampton Roads requires a 50-foot deep draft anchorage in order to properly anchor vessels loaded to a draft of 50 feet. Most vessels loaded to 50 feet sail directly from the loading facilities to the open sea without the need to anchor. However, there are circumstances that may require vessels to remain in port.|
The need for such an anchorage is justified in terms of vessel layovers when utilizing more than one loading terminal, the volume of vessel traffic, vessel repair requirements, and the possibility that a fully loaded vessel could break down and block the channel. A 50-foot anchorage would ensure the safety of the vessel, crew and cargo, as well as maintain accessibility to the ports. The presently available natural deep anchorage can accommodate a vessel of 800 feet in length, with a 46-foot draft, within the Port of Hampton Roads. However, with the advent of the "mega-ship" and the heightened use of the large-capacity coal colliers, a deep draft anchorage is necessary in order to accommodate the industry and maintain the port's competitive edge. In fact, in the past year alone, approximately 3 vessel calls per week were made on the Port of Hampton Roads that required a draft of over 48 feet outbound. It is vitally important to consider that a deep draft anchorage, while presently most significant to large-capacity coal colliers, will ultimately be necessary in order for the Port of Hampton Roads to attract and support container mega-ships.
As part of the Norfolk Harbor and Channels project, the 50-Foot Anchorage element would consist of the deepening and maintenance of the existing natural anchorage to a depth of 50 feet below mean low water to provide for a conventional, circular anchorage with a radius of 1,500 feet. In addition, shoals located between the channel and the anchorage area would be removed and maintained to a depth of 50 feet to allow for adequate access. The estimated project cost for the 50-Foot Anchorage and Access Areas is $4,347,000 (October 1997, fully-funded dollars), with maintenance estimated at $1,030,000 every six years ($141,000 on an annual average basis).
The Water Resources Development Act of 1986, as amended, specifies the cost-sharing requirements associated with the construction and maintenance of Federal navigation projects. For project construction, the Non-Federal sponsor is required to provide, prior to construction, a cash contribution equal to 50 percent of the total cost of construction of the general navigation features at depths below 45 feet, mean low water. In this instance, the Non-Federal Sponsor would be responsible for $2,608,200 of the cost of project construction.
With regard to maintenance, the Federal government will assume responsibility for 100 percent of the cost of maintenance of the project to 45 feet. The Non-Federal sponsor will be required to contribute 50 percent of the added cost of maintenance for depths greater than 45 feet. Thus, the Non-Federal Sponsor's estimated share of the project's maintenance cost is approximately $515,000 every six years, or $85,833 annually. (The U.S. Army Corps of Engineers has estimated the average annual benefits of the Anchorage project to be $632,000).
In addition to the cost-sharing requirement, another factor that must be considered is the time frame in which the Non-Federal share must be submitted. According to the Army Corps of Engineers, Congress will likely add Federal funding for the construction of the project to the Federal Fiscal Year (FY) 1998 budget. This means that Federal construction funds could be received sometime between early November 1997 through late January 1998. If that is the case, the Army Corps of Engineers intends to award a construction contract by the last quarter of FY 1998 and accomplish construction during FY 1999. This schedule is contingent upon the Commonwealth of Virginia, through the Virginia Port Authority as the local sponsor, providing its share of the project construction cost soon after July 1, 1998. Otherwise, the Commonwealth could lose federal support for the Project, and the ability to execute a program that Congress has authorized.
This report details the history behind, and the need for, the Deep Draft Anchorage, as well as provides an analysis of three alternative methods of funding the Non-Federal share of the construction and annual maintenance cost of the Project. The first of three alternative funding methods studied involves the imposition of a fee on each vessel that passes through the Port of Hampton Roads. The second funding alternative analyzed is a fee on all coal colliers that utilize the Port. The third funding method reviewed involves a fee levied on all large-capacity coal colliers (those ships that require a 50-foot draft).
The study reveals flaws inherent in each potential funding solution. Imposing costs on all vessels would be damaging to the port's competitive position, would be vigorously opposed by those who would not be immediate beneficiaries of a deep draft anchorage, and would be likely challenged in court. In addition, the economic burden imposed on each vessel would be significant.
Further, it would be counter-productive and contrary to the purpose behind the Virginia Coalfield Employment Enhancement Tax Credit to levy a tax against coal exporters. In summary, the competitive position of the industry would not be able to withstand the imposition of added fees.
These flaws, coupled with the need to respond quickly with the Non-Federal share of the project, lead the committee to conclude that the Non-Federal share of the Deep Draft Anchorage Project must be funded through a General Fund appropriation by the General Assembly.