Bill Mongelluzzo, Senior Editor | Oct 18, 2017 10:13AM EDT

Beneficial cargo owners (BCOs) are on the hook for some of the $4 billion that terminal operators at Los Angeles and Long Beach will have to invest in zero-emission cargo-handling equipment by 2030 to meet clean air rules, John McLaurin, president of the Pacific Merchant Shipping Association (PMSA), said Tuesday.

Terminal operators, which contribute less than 1 percent to greenhouse gas (GHG) emissions in the state, must achieve emissions reductions in cargo-handling equipment 20 years before other industries. California’s regulators have set 2050 as the date when all industries in the state must reduce GHG emissions to 80 percent below 1990 levels, McLaurin said.

“The current Clean Air Action Plan [CAAP] draft lacks balance and a vision for keeping the ports of Los Angeles and Long Beach competitive while at the same time reducing emissions. Port tenants, customers, local residents, and the one-in-nine jobs that are dependent on our ports deserve better,” McLaurin told the Propeller Club of Southern California.

The ports will soon release the final draft of an update to their historic CAAP that was implemented in 2006 and is by far the most stringent port emissions reduction plan in the United States. This latest plan, which is called CAAP 3.0 because it is the third iteration of the original plan, is scheduled to go before the ports’ harbor commissions for approval in early November.

Los Angeles and Long Beach are under pressure to achieve zero emissions from all types of port activity, where possible, and where it is not feasible, to strive for near-zero emissions. The mayors of both cities endorsed the zero-emissions goal for nitrogen oxide, sulfur dioxide, and diesel particulate matter emissions, as well as GHG emissions.

Port managers have stated publicly that they seek a balance between environmental goals and cargo growth, which generates more jobs. They are working with state and federal agencies to secure grants for public-private partnerships, and they say that as technology develops and new equipment is mass produced, the costs will not be as great as industry sources are predicting.

The PMSA, which represents terminal operators and shipping lines on the West Coast, feels the ports and their customers are being asked to invest billions of dollars to achieve incremental gains in emissions reductions. McLaurin noted that over the past decade terminal operators in California have reduced diesel particulate matter by 96 percent. That pollutant is known to contribute to higher rates of lung cancer and other respiratory diseases. “According to the ports’ own data, these reductions have been achieved at a cost of between $1 billion and $2 billion. Under the proposed CAAP, the final four percent reductions will cost over $14 billion,” he said.

McLaurin stressed the impact these costs could have on the competitiveness of the Southern California port complex, which has lost about 10 percent market share of US imports from Asia since 2003. As port costs escalate, some BCOs may seek to divert additional cargo to other ports outside of California.

While acknowledging that the ports will seek federal and state grants, McLaurin said that “given the limited opportunities for state and federal funding, the competitive nature of our business and the political realities of our national politics, I would suggest that these specific CAAP proposals are not well thought out,” he said.

There are 13 container terminals in the largest US port complex, some of which have leases that will come up for renewal before 2030. As those leases expire, terminal operators, which like shipping lines have been going through consolidation, will have to decide if it is worth the effort to invest millions of dollars to meet the CAAP requirements, or to sell their assets. McLaurin said that although consolidation is a fact of life today, he has never seen a time when so many terminal operators are considering an exit strategy.