Harbor Performance Enhancement Center says it was told the International Longshore and Warehouse Union runs the port.
The developers of a planned mammoth dray-off yard in the Port of Los Angeles have sued the port after they were told their plans were “infeasible.”
The Harbor Performance Enhancement Center (HPEC) would be a facility on port property at the site of the now-demolished Los Angeles Export Terminal (LAXT). That terminal was once used to store petroleum coke before it was loaded on ships.
The developers of HPEC planned to build what essentially would be a large parking lot (pictured in an artist’s rendition above) where containers on chassis would be trucked to and from container terminals and then picked up by drivers who would take the containers to their final destination or back to the port.
Much of the cargo that moves out of the port has to travel long distances — 60 miles or more — to warehouses in areas such as the Inland Empire. Staging trucks at a location outside of the port container terminals would allow containers to be picked up at any time of the day and reduce turn times.
The lawsuit says the port “has publicly stated that the project will increase port throughput by 20%,” although in some accounts a 10% improvement productivity is mentioned.
HPEC has said there would be enough space at the 110-acre site to accommodate on a daily basis as many as 3,500 to 4,000 containers on chassis. The project, with a cost estimated at various times at $130 million or $150 million, would include a four-lane bridge that would fly over rail tracks that surround the site where the truck yard would be located.
It also would include raised solar panels that could generate 25 megawatts of electricity to power electric dray trucks to move containers to and from marine terminals. There was even a plan for an Institute for Logistics Research that would be located at the site, according to a video about the project.
Jonathan Rosenthal, the chief executive officer of HPEC, said that in March 2018, HPEC had sold a half interest in the project to the Macquarie Group.
Funds managed by Macquarie are big investors in port infrastructure — they purchased Maher Terminals in the Port of New York and New Jersey from Deutsche Bank in 2016 with NYK and in March acquired 100% of NYK Ports (North America). In April one of its funds led a consortium that purchased the Long Beach Container Terminal from the parent company of Orient Overseas Container Line.
Rosenthal said the investment in HPEC was an unusual display of confidence in the project because it was done by Macquarie’s principal finance group, not a fund.
(Dray-off yards are used by a number of port trucking companies, including Shippers Transport Express and NEXT Trucking, which just this week announced it was opening an 18-acre truck yard in Long Beach, 10 miles from the port, where containers would be relayed between truckers moving cargo to and from marine terminals and truckers moving cargo between the off-dock yard and inland locations.)
In a May 10 letter, Eugene Seroka, the executive director of the Port of Los Angeles (POLA), wrote to Rosenthal telling him the port “has determined the proposed project to be infeasible and provides notice of termination of any rights or obligations created by the 2016 exclusive negotiating agreement.”
HPEC said in its court complaint seeking injunctive relief that decision would potentially render “worthless petitioner’s (HPEC’s) years of hard work and substantial investment.”
In its lawsuit, which was filed in Superior Court of the State of California, County of Los Angeles on June 17, HPEC said it “worked continuously and tirelessly with POLA staff to move the project forward, spending over $2.5 million on agreements with POLA, design and construction work on the project by HPEC’s independent engineering consulting firm AECOM and CEQA (California Environment Quality Act).”
Rosenthal told American Shipper in February that it would be naïve for “anyone that develops 5.5 million square feet in the middle of the largest and busiest port in the Western Hemisphere — if they go into it with the idea that they’re not going to have labor issues.”
But he said HPEC was “very engaged with labor and I think we have a good relationship on all those fronts — with trade labor and with the longshoremen union and others.”
However, in its lawsuit HPEC said in April 2018 it had received “stunning news” from three years into the project.
“Seroka disclosed for the first time that a new condition precedent was being imposed by POLA. HPEC would be required to guarantee that the International Longshore and Warehouse Union (ILWU) would be granted jurisdiction and exclusive rights to provide all intra-port trucking services to and from the project (i.e. drayage rights)” and that the project could not go forward unless HPEC “obtained the affirmative support of the ILWU, regardless of the cost or impact on the project.”
HPEC said it “was blindsided by this revelation” but continued preparations for a pilot project “designed to collect data concerning container movement efficiencies created by HPEC’s operational model.”
It said in June 2018 the port “refused to honor the terms of HPEC’s pilot study permit by prohibiting HPEC from using the newly constructed pilot study site, while at the same time demanding that HPEC pay monthly rent in accordance with terms of the pilot study permit.”
HPEC said it “made repeated (sometimes daily) efforts to reach an agreement with the ILWU as to drayage rights. These efforts were continually rebuffed by ILWU representatives, who insisted that their union be provided exclusivity over intra-port drayage, with no regard for the impact on ILWU exclusivity on the commercial viability of the project, its intended purpose or the public good and ignoring the inability of the ILWU to perform intra-port drayage.
“Rather than help mediate with the ILWU or insist that the ILWU negotiate in good faith, Executive Director Seroka, in April 2018, advised petitioners in writing that they must accommodate the ILWU’s demands because ‘they [ILWU] run the port.’”
HPEC said it believes the May letter terminating its agreement with the port was not approved by the port’s harbor board or city council and was not legally authorized. It contends the port and city of Los Angeles have “failed to act as required by the city charter” and asks for an injunction and for its rights and interest in the project to be reinstated.
A spokesman for the Port of Los Angeles said the agency was declining comment on the matter because it is in litigation.
