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Why the Calcasieu Ship Channel is Vital to the Region’s Economic Success

Lagniappe Magazine, March 27, 2014

With the eyes of America on Southwest Louisiana—and the estimated $62 billion in development projects coming to the region—it stands to reason that special attention would also be paid to the infrastructure so necessary for this economic activity—most notably the Port of Lake Charles and the Calcasieu Ship Channel.

“The Port is vital to these projects,” said Bill Rase, Executive Director of the Port. “Existing industries and the industries coming into the area count on the Calcasieu Ship Channel to transport their goods.”

A public body created by the Louisiana Legislature in 1924 as the Lake Charles Harbor & Terminal District, the deepwater Port of Lake Charles is currently listed as the country’s 13th-busiest seaport in the country by the U.S. Army Corps of Engineers, based on cargo tonnage. The Calcasieu Ship Channel currently accommodates 54 million tons of cargo annually.

“Waterborne transportation remains one of the most efficient and environmentally safe methods for global trade,” said Rase.

Waterborne commerce at the Port is expected to double by 2020. That kind of increase could push the Port of Lake Charles into the Top Ten busiest ports in the nation.

“Ports are not visible to the average person who is not involved in industry,” said Channing Hayden, Director of Navigation and Security for the Port. “Yet 90 percent of the items folks buy come in by ship and much of our exports go out by ship. The items in our closets wouldn’t be there without the maritime industry.”

In addition to such cargoes as grain, forest products, aluminum, petroleum coke, barite and rutile, a significant portion of the nation’s energy resources—an estimated 7.5 percent— currently moves up and down the Calcasieu Ship Channel each year.

The Port manages the channel, which runs inland for 36 miles and extends out into the Gulf of Mexico for another 32 miles, as well as two marine terminals—the City Docks and Bulk Terminal No. 1.

The City Docks, a 200-acre general cargo facility located in Lake Charles, features an automated terminal and the Gulf Coast’s first new grain terminal in more than 40 years. The new grain terminal will have a capacity to store 60,000 tons of cargo in phase one of construction, with storage for an additional 120,000 tons planned in the second phase.

Discovery Channel: Prospect Companies See the Channel’s Strategic Value

The past year has seen an unprecedented number of major project announcements, trumpeting more than $60 billion in investment coming to Southwest Louisiana. The Port of Lake Charles has played a key role in attracting that investment, whether by offering prime channelside land for development, by assisting in negotiations and arrangements with industrial prospects, or simply by maintaining an effective transportation route—the Calcasieu Ship Channel—that has brought industry to this area for decades.

Most of these projects—which include Sasol North America, Lake Charles Clean Energy, Sempra Energy’s Cameron LNG, IFG Port Holdings, Magnolia LNG, Trunkline LNG and G2X Energy—are coming to this area specifically to make use of the Calcasieu Ship Channel.

One factor that has contributed heavily to this influx of industrial projects is the discovery of major natural gas resources in the U.S. Much of that natural gas will make its way to Southwest Louisiana to be liquefied and exported via the Calcasieu Ship Channel. That trend will only strengthen the channel’s claim to be “America’s energy corridor.”

Initial projections are that the announced projects will create nearly 18,000 construction jobs and 14,000 additional direct and indirect jobs. Anticipating a demand for housing for the growing workforce, a private company broke ground recently on a $70 million temporary employee housing village, to be located on Port property. Once completed, the facility could house as many as 4,000 workers. “In order for all of these projects to be successful we have to have a place for workers to stay,” said Rase.

As a result of this seemingly endless uptick in business, the Port has plans for nearly $275 million in capital improvements over the next 5 years. Recently completed improvements include a new unloader for the bulk terminal, which increases offloading and cargo-handling capacity, and new rail tracks at the City Docks. Designed as a loop, these tracks are critical for operations at the new grain elevator.

Improvements at the City Docks also include a new entrance plaza near the intersection of Marine and Sallier streets to more efficiently process incoming and outgoing truck and other vehicular traffic while enforcing Department of Homeland Security credentialing requirements, and a new command and control center for the Harbor Police Department.

Whether Channel: Can the Channel Get the Maintenance Funds It Needs?

Despite the burgeoning economy—or maybe because of this growth—the Port still has challenges, not the least of which is funding for maintenance of the channel.

The Corps of Engineers recently allocated $10 million for the dredging of a crucial 3.5-mile section of the waterway. A portion of this allocation, which was from the 2014 Omnibus Budget Bill discretionary fund, will be added to the $16.24 million originally budgeted for this fiscal year to dredge between mile markers 7 and 10.5. The widening will be to a federally mandated width of 400 feet.

Left with only the $16.24 million originally budgeted for harbor maintenance and security—which encompasses dredging—this section of the channel would have been significantly shy of the mandatory width at only 250 feet.

A narrowed corridor would have adverse economic consequences for channel users—and Southwest Louisiana as a whole, according to Hayden.

“Without dredging, there are consequences—higher costs to ship into or out of our harbors,” he said. “Higher shipping costs will ultimately be passed on to consumers.”

In and of itself, the Army Corps of Engineers has limited funds. During the President’s budgetary process, funds are appropriated for the Corps of Engineers from the Harbor Maintenance Trust Fund (HMTF), which was established in 1986 specifically to subsidize the operation and maintenance of ports and harbors. The HMTF is funded by a Harbor Maintenance Tax levied on imported goods.

For a number of years, appropriations from the Harbor Maintenance Trust Fund (HMTF) have lagged behind the estimated $1.6 billion collected annually. As a result, the HMTF had a surplus of approximately $7 billion at the end of FY2012. That surplus continues to grow—as does the need for additional dredging dollars at ports throughout the U.S.

Dredging is an annual expenditure for the Port of Lake Charles that totals between $40 million and $60 million and entails removing approximately 4 million cubic yards of material from the channel each year. The excavated mud has historically been used to shore up banks of the channel and as fill for the Port’s properties.

“Louisiana’s coast supports highways, ports, pipelines and navigational waterways, critical infrastructure that are important to the nation’s economy,” said Hayden. “Without restoration efforts and at the current rate our coasts are eroding, hundreds of miles of waterways and several of Louisiana’s ports will be exposed to open water within 50 years.”

Sediment dredged from the local channel has been used to build up deteriorated wetlands in the Sabine National Wildlife Refuge west of the channel in Cameron Parish. And sediment from the dredging of Miles 7 to 10.5 in 2014 will be pumped into nearby marshland to restore it to health. As plants and grasses root in the slightly elevated mud, new marsh is created. CWPPRA has identified approximately 6,200 acres of Southwest Louisiana’s coastal marshes for possible marsh creation projects in conjunction with the Port.

“This is a synergy that could be developed to maintain the region’s economy and environment at the same time,” said Hayden.

History Channel: How the Calcasieu Ship Channel Came To Be

A water route from Lake Charles to the Gulf of Mexico has been important to business and industry leaders in Southwest Louisiana since the early 1800s when lumber and agriculture were the kings of commerce in the region.

With the end of the Civil War in 1865 came a demand for Louisiana lumber to rebuild a war-torn South. And with the demand for lumber came the need for better access to the mills that had sprung up throughout Calcasieu Parish. At the time, Lake Charles was a port of call for vessels navigating the shallow Calcasieu River, but sandbars made the river impassable to all but shallow-draft schooners, which were not suitable for transporting lumber. The lumber industry declined, in part due to limited access to and from the Gulf, to be replaced by a rapidly growing rice industry. Ironically, the rice industry also needed navigable waterways.

Cuts were finally made through sandbars in Calcasieu Lake, resulting in a 70-foot-wide by 7,500-foot-long channel to the Gulf. But pleas for a deeper channel went unheeded until Congress authorized a deputy harbor tax collector for Lake Charles in 1880. However, it was another 10 years before a harbor tax collection office was established at Calcasieu Pass.

With the completion of the Intracoastal Canal in 1915, the Calcasieu and Sabine rivers were connected by a 20.5-mile-long, 12-foot-deep canal with a 90-foot bottom width, and business leaders saw this as an opportunity to open Calcasieu Parish for commerce.

Under provisions of the 1921 state constitution, parish police juries were authorized to fund and initiate public works projects. By act of the legislature that year, the Calcasieu Parish Police Jury was authorized to call a bond election for the dredging to widen Calcasieu River and Calcasieu Lake.

A bond election was held a year later, and voters approved $2.75 million to dredge the Calcasieu River to a 30-foot depth, with a bottom width of 125 feet, which provided a navigation route through the Intracoastal Canal to the Sabine River and Gulf of Mexico.

With the authorization of the Lake Charles Harbor and Terminal District in 1924, a Board of Commissioners was appointed by the governor, and the process of building a terminal facility—and raising the requisite funding—began.

The board acquired the Walnut Grove site, a plot of land bounded by the Calcasieu River and Contraband Bayou, a port director was hired, and transit sheds were completed and space leased. On April 2, 1926, the S.S. Sewalls Point was the first oceangoing vessel to bring cargo to the newly authorized port.

With local industry booming, the need for a wider, deeper channel grew. Congress ultimately appropriated $9.2 million for channel dredging and construction of the Calcasieu jetties in 1938. As a result, the Calcasieu Ship Channel was dredged from Lake Charles to the Gulf of Mexico, a distance of 34 miles, to a depth of 33 feet and to a bottom width of 250 feet. It wasn’t until the 1960s that the channel was expanded to 40 feet deep and 400 feet wide, as it remains today.

There’s a sense of déjà vu to the latest chapter in the Port’s storied history. Business is booming in Southwest Louisiana and the Port of Lake Charles is growing its facilities—and maintaining the channel—to meet the demand.

And it’s the Port of Lake Charles and the Calcasieu Ship Channel that make Southwest Louisiana a serious player in the game of global trade.

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