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Saturday, February 04, 2012
Regional Focus: July 2009
Port-au-Price
Will investments pay off at the Port of Sacramento?
Story by J.T. Long
The Port of Sacramento is going green. An $80 million investment to deepen the channel along with development agreements with three new recycling companies could put the Sacramento-Yolo Port Commission in the black after eight years of losing money.
“We are at a turning point,” says Port Manager Mike Luken. Instead of directly handling operations, the city of West Sacramento merged with the Port of Sacramento Commission and partnered with the Port of Oakland for better exposure. That led to a profit sharing agreement based on cargo tonnage fees with Seattle-based SSA Marine, which manages 120 terminals globally. Now the city acts as a landlord with world-class operations management as a significant attraction to potential tenants. “SSA Marine opened the door to a number of new tenants,” Luken says.
One of the goals of the commission is to diversify the port’s agricultural base, which relies heavily on the movement of fertilizer and rice. A record 339,000 metric tons of rice will pass through the port and on to the Pacific Rim this year — that is the highest quantity in a decade and double last year’s exports.
“It is not as much as we handled in the heyday of the 1970s, but it helps,” Luken says.
The port expects to lose $1.2 million in revenue for fiscal year 2009. The commission had hoped two new cement operations announced in 2006, CEMEX S.A.B. de C.V. and Pan Pacific Cement, would bring as much as $2.3 million in additional annual revenue by cutting the port in on the then-lucrative construction industry. The two bulk-cement plants were completed just as the construction industry ground to a halt, leaving them operating at a fraction of their projected capacity. “If the cement operations were at full speed, we would be in the black,” Luken says.
Still, Luken says the $74 million the companies spent to build the efficient plants was a wise investment. The Port of Sacramento will be home to two of five plants serving the Central Valley. “They will be valuable when the economy picks up again,” Luken says.
The commission is not waiting for housing to start rebounding. In the past year, it has announced that three recycling companies are bringing in environmentally friendly operations, another Port Commission goal and a growing industry sector. Enligna US Inc., a wood-pellet manufacturing plant; West Coast Recycling Group LLC, a junk sorter and shredder; and Primafuel Inc., an alternative and biodiesel production facility, all announced plans to lease land, build and operate at the port.
“The world is moving to larger vessels,
and we have to keep up to remain competitive.”
— Jay Ziegler, principal, Ziegler Associates
Germany-based Enligna plans to invest $80 million to convert three existing facilities — a fertilizer warehouse, a wood-chip processing conveyor and grain silos — into a manufacturing and storage operation for its wood-pellet energy business. The wood pellets would be shipped for international industrial (and eventually domestic) use. Raw materials would come from urban tree cutting, forest fire-prevention clearing in the foothills and orchard pruning in the Central Valley. In addition to creating greener fuel for coal-fired power plants, the facility would also create 3.5 megawatts of heat energy for use on site.
“We are solving a disposal problem and creating energy solutions,” says Lutz Glandorf, president of Enligna US.
The facility will be Enligna’s first in the U.S. The company currently runs production facilities in Torgau, Germany, and Nova Scotia, Canada. Because the operation will be in an Enterprise Zone and Recycling Market Development Zone, it qualifies for tax credits and low-interest loans, but those incentives are small compared to the benefit of being close to raw materials and transportation hubs, according to Glandorf.
“We looked at every West Coast city with a port and found that Sacramento had a unique combination of raw materials and transportation opportunities,” Glandorf says.
Enligna plans to employ 35 people when it begins operations in 2010, but more than 100 additional jobs would be created in transportation and loading, Glandorf estimates.
Across the road from the planned wood repurposing site, Minneapolis-based Infuse Capital LLC plans to invest $25 million to create the area’s first metal sorter and shredder on a 15-acre site formerly housing Riverside Aggregates Inc. The port operation, known as West Coast Recycling Group, will turn old cars and dishwashers into 240,000 metric tons of compact scrap metal for annual export to Asian markets — primarily China, South Korea and India. This could result in $1 million a year in tonnage fees for the port.
The plant would employ 15 to 20 workers initially but could grow to as many as 60 employees. As many as 75 trucks per day would bring scrap metal that would otherwise go to the Bay Area to be recycled.
Signal Hill-based Primafuel Inc. announced in 2007 that it would spend $120 million to build a biofuel plant on what is now a dirt field. The plant was delayed by changes in California Air Resources Board requirements and a frozen credit market. “There is not a lot of money sloshing around in the market now for infrastructure projects,” says Rahul Iyer, Primafuel’s chief strategy officer.
“If the cement operations were at full speed, we would be in the black.”
— Mike Luken, port manager, Port of Sacramento
Primafuel restructured the project so it can be built in stages and scaled up as demand increases. That way the company can break ground with a smaller initial outlay. The first phase of the project is a renewable fuels terminal that could eventually store 100 million gallons of alternative fuel in 48 tanks. That would be followed by a 60 million-gallon biodiesel blending plant and a 39,000-square-foot research and development facility. Once the plant is running, it could generate $345,000 a year for the port and create as many as 60 jobs.
“The project is the first marine liquid terminal approved in 25 years and an essential part of the infrastructure to implement California’s greenhouse gas reduction goals,” Iyer says.
The promise of a 5-foot deeper channel could help new and existing clients compete and keep the port afloat. Since an initial dredging project was abandoned due to a debate over who should pay to move PG&E gas lines, the port has struggled with a 30-foot floor.
Yara North America, the fertilizer importer abandoning the warehouse space Enligna will take over, is leaving for the deeper waters of Stockton’s 34-foot channel, which is scheduled for its own 5-foot scraping.
Last year, the port commission agreed to pay to move the lines with $10 million in Proposition 1B funds. This local match will leverage $10 million in federal 2010 Civil Works funds announced in May to start the $80 million trenching project.
At the current depth, 60 percent of modern freight ships can’t make the 43-mile journey from the San Francisco Bay Area. If they do, many have to make the trip partially loaded. Once the project is complete in 2013, ships would be able to carry a full 40,000-metric ton load instead of the current 33,000-metric ton limit. “That increases efficiency,” Luken says.
The channel deepening also opens up the possibility of ferrying container barges to Oakland to take traffic off freeways. The port currently does no container business.
Deepening the channel will help Iyer’s company import raw agricultural waste materials from all over the world and export statewide. “A multimodal hub is essential to creating a gateway for the clean fuel market,” Iyer says.
Jay Ziegler, principal of Ziegler Associates and a consultant for all three new tenants, says the deepening is significant. “The world is moving to larger vessels, and we have to keep up to remain competitive.”
