Coos Bay seeks more cargo with a new leader, revitalized rail, plans for deeper channel.
Oregon’s biggest port, Portland, has seen strife between dockworkers and its container terminal operator and two container carriers—Hanjin and Hapag-Lloyd—leave the port earlier this year.
In the south of the state, where the far lesser well known Oregon International Port of Coos Bay is on the hunt for a new chief executive officer and seeking to grow its business.
“We’re looking for somebody that has experience within the port industry and really within the maritime industry that understands the unique role that ports play in the supply chain,” said David Koch, CEO of the port since June 2012, and chief operating officer since October 2010.
“Particularly with the growth curve that the Port of Coos Bay is on, with the development of new projects, we need now that experienced port manager to come in and take the Port of Coos Bay up to that next level, recruit cargo opportunities and get terminal facilities developed. That was never my background and it wasn’t why I took this job,” he said.
Koch, who has lived in the community for 13 years, took the helm after serving as one of the port’s contract attorneys. In recent years the port has made major progress in rehabilitating a shortline railroad and is pursuing a harbor deepening project with the Army Corps of Engineers that would deepen the first 8.5 miles of the port’s channel from 37 to 45 feet.
Deeper water is needed because Calgary, Alberta-based Veresen is planning to build a liquefied natural gas export terminal at the port.
But the port originally looked at deepening when A.P. Moller-Maersk considered developing a container terminal in Coos Bay.
“At that time there were projected capacity constraints at West Coast container terminals,” Koch noted. “That predates my time at the port, but my understanding is that Coos Bay was at the top of the list for a new greenfield container terminal site. The property that was under consideration at that time for development of that terminal facility was owned by Weyerhaeuser,” which had 1,300 acres in an area the port calls the North Spit that’s in lower Coos Bay or the lower 8.5 miles of the port’s deep-draft navigation channel.
Since that time, the port has acquired the property from Weyerhaeuser as part of a transaction involving Veresen’s Jordan Cove Energy Project which would liquefy natural gas and load it on gas tankers.
The plan calls for gas to be brought to the port via a 232-mile pipeline from Malin, Ore., where several pipeline systems connect and have access to both Canadian and U.S. wells. Veresen said it has received a final license from Canada’s National Energy Board to export gas to the United States.
The pipeline to Coos Bay would also have capacity to supply a local electric power plant, if built.
The project is working its way through the permitting process and a final environmental impact statement is expected to be issued on Sept. 30.
Like many LNG projects, Jordan Cove was conceived as an import terminal, but has since been modified into an export facility as gas production has boomed in the United States and Canada in recent years
Koch said there has also been some discussion about whether the port could be used for bunkering ships with gas, noting within the shipping industry there’s a “chicken-and-egg discussion of how do you build LNG-fueled vessels and the bunkering facilities” and even whether barges could bring gas to ships 200 miles offshore beyond the emission control area to provide ships with cleaner fuel.
There are four privately owned deep-draft marine terminals in Coos Bay today, Koch said.
Two of them—the Oregon Chip Terminal and Roseburg Forest Products Chip Terminal—are predominantly used for wood chip exports; the other two—Ocean Terminals and K2 terminal—are used primarily for log exports. The K2 terminal is owned by the Coquille Indian Tribe.
There are also several dedicated barge terminals.
Part of the port’s strategy over the past decade has been to acquire property in the North Spit area that could be developed into new cargo facilities and used to diversify the port’s cargo base.
These would be facilities owned by the port and leased or contracted out to private terminal-operating companies.
“We’re not focusing on containers as a near-term strategy. Our focus is on predominately bulk, liquid-bulk or dry-bulk product that we could move by rail,” Koch said. He did not want to say if crude oil was one of the commodities that the port is targeting.
Koch noted the port owns the Coos Bay Rail Link, a 134-mile railroad that runs from Coquille, south of the port and north, near the Oregon coast, before turning eastward to connect with the Union Pacific in Eugene. Acquired in two stages in 2009-2010, the rail line has been restored and is now being operated under contract by ARG Transportation Services.
“Owning the rail line has allowed us to tap into federal and state resources to provide some frankly very much needed maintenance on the line and to rehabilitate many of the structures along the rail line,” Koch explained. In 2010, the port was awarded a $13.5 million TIGER grant for improvements to the railroad.
The port has spent about $35 million to date and has another $12.5 million on hand through state grants to undertake additional projects in the coming year, he said.
In addition, Koch said the Oregon legislature in a session that wrapped up this summer appropriated another $10 million to the port for work to be done starting in 2017.
The port has enhanced capacity of the rail line in terms of higher allowable train speeds and increased the life of bridges that needed replacing or repaired. (The railroad has nine tunnels and 118 bridges.)
“We’ve upgraded the condition of the rail, ties and ballast to better serve existing customers, but also in anticipation of future upgrades that we could make to handle multiple unit trains a day, for example, of bulk commodities down to the Coos Bay harbor to service the terminal facility,” Koch said. The railroad can now handle cars loaded to 286,000 pounds, which for most types of cargo is a fully loaded railcar.
Volumes on the short line have increased from about 2,500 carloads in 2012 to 7,500 carloads last year, and the port is now interchanging anywhere from 30 to 100 railcars with the UP five days a week. Most of the cargo is forest products, Koch said, adding “If you look at Google Earth, you can see we have a lot of trees around here.” Feed for the dairy industry in Coquille Valley is another source of freight.
“Acquisition of that rail line has been one of the port’s key strategic moves in order to allow us to have greater control over what we can present to a potential developer,” he said.
While there is opposition to the movement of oil and coal in many ports along the West Coast, Koch said “The politics of this part of the state are different then the politics of Portland.”
“If I use the LNG project as an example, there have been three LNG terminal projects proposed within Oregon, two of them up on the Columbia River and one of them down here in Coos Bay,” he said. “Among the political establishment you’ll see a very different language used when discussing the Columbia River projects and the project down here in Coos Bay.”
He said this “has a lot to do, one, with the politics of the area but it also has to do with the economically depressed nature of the rural parts of the state and the recognition that most of the job growth that has occurred in Oregon since the Great Recession has been in the urbanized areas along the Columbia River.
“You still see the rural parts of the state… counties that are suffering chronic poverty. Particularly an area like southern Oregon that in a lot of ways has been suffering through a 30-year recession since the initial downturn of the timber industry in the early to mid-80s,” Koch said.
Annual cargo volumes at Coos Bay in recent years are in the range of 1.5 million to 2.25 million tons of cargo per year, and fluctuates with the log market, compared to as much as 8 million to 9 million tons in the early to mid-1980s.
“We had well over 300 deep-draft vessels calls per year and that dropped to between 50 and 60 deep-draft vessel calls per year, which is what we see now,” Koch said.
This article was published in the October 2015 issue of American Shipper.
