P R E P A R E D F O R :M I S S I S S I P P I D E P A R T M E N T O F T R A N S P O R T A T I O N

P R E P A R E D B Y :R N O G R O U P

W W W . R N O G R O U P . C O M

A U G U S T 1 7 , 2 0 1 0

“MHy Delta” Delta Marine Highway

“ D E V E L O P A S U S T A I N A B L E C O N T A I N T E R O N

B A R G E O P E R A T I O N O N A S C A L E C O M P A R A B L E T O

A N Y M A J O R R A I L O R H I G H W A Y T R A D E

C O R R I D O R . ”

VISION

Europe, Asia USA

COB services have existed almost as long as the container trade, pre-dominantly in Europe and in China/Hong Kong.

COB services are also in existence in the United States, particularly in the northwest, the Gulf Coast and along the eastern sea-board.

COB Services are Tried and Proven

Cross Sector Subsidy Economics of Ubiquity

COB services in the region are currently subsidized by the bulk transportation services sector.

The region’s most sustainable COB services are integrated into larger bulk operations, thereby benefiting from the economies of fleet scale and vessel ubiquity.

Container barges used on the Mississippi are standard open hopper river barges used for a wide variety of cargoes and are easily integrated into a conventional bulk fleet.

Ubiquity results in limited need for repositioning, saving the barge operator a great deal of money and time.

Fleet Integration Offers Sustainability

Delta Marine Highway Action Plan

This point in the development of container capacity in the Gulf is a convergence of trends, and an opportunity to influence the mode choice decision process; With the shipper, the forwarder/agent, third-party service provider, port terminal developers and operators, and the carriers.

Convergence of Trends

D E V E L O P I N G A D D I T I O N A L C O N T A I N E R C A P A C I T Y N E A R T H E B A S E O F T H E M I S S I S S I P P I R I V E R I S A N A T I O N A L

I M P E R A T I V E

Regional Gateway Port Strategy

America’s Heartland is a Watershed Region for Internat’l Trade Flows

East CoastPort Markets

West CoastPort Markets

a = % US 2008 port container traffic; b = % 2009 US population

50% 30% 44%26% 7% 43%

a b a b a b

America’s Heartland is a Watershed Region for Internat’l Trade Flows

The addition of a third alternative mode of landside transport, in addition to truck and rail, reduces the growth in truck traffic

Every 1 million TEUs in additional port capacity at the base of the Mississippi could cut the growth in truck trips by 172 thousand trips, and 63 million trucks miles

East CoastPort Markets

West CoastPort Markets

a = % US 2008 port container traffic; b = % 2009 US population

50% 30% 44%26% 7% 43%

a b a b a b

Strategic Imperative

A System of Container Gateway Ports

Port of Gulfport – Plans expand to over 1 million TEUs

Port of Mobile –Recently built a 800,000 TEU terminal, with likely plans to expand further

Port of New Orleans -Currently at 330,000 TEUs, plans to expand to 1 Million TEUs

Seapoint – Planned ship-to-barge port handling 900k TEUs

Phase I: Container Gateway Ports

• Volumes -Development of significant container volumes at and around the base of the Mississippi River, New Orleans to Mobile.

• Mode Share -Enhanced mode-share incentives will need to be implemented so as to encourage mode diversion.

• Inter-Gateway Services - High-speed container services between the ports will allow for the re-positioning of loads in co-ordination with liner schedules. Sea Point

Mobile

Gulfport

New Orleans

Phase II: Vicksburg to Memphis

As the container volumes start to build at the gateway ports, line-haul services should begin to evolve along the Mississippi and Ten-Tom waterway on either side of the State. The gateway ports are positioned in such a way that the growth of COB services will be possible on either side of the State.

Sea Point

Mobile

Gulfport

New Orleans

Vicksburg

Yazoo County

Rosedale

Greenville

Claiborne County

Natchez Adams County

Itawamba

Yellow Creek

Amory

Aberdeen

Clay County

Lowndes County

Phase III: Complete the Loop

Notwithstanding the need for gateway densities, the development of inland container traffic along the Mississippi or Tenn-Tom waterways will be driven by the location of inland consumer/producer markets.

Sea Point

Mobile

Gulfport

New Orleans

Upper Mississippi

Ohio RiverRegion

Cairo/Paducah

Mode Shift Tactics at Gateway Ports

Inland Mode Shares at the Port of Rotterdam

Modal Shift (% tons on waterways)

Revenue (# of ships calling at port)

Economics (# of jobs created)

Cargo TypeInland Mode

Barge Rail Pipe Truck Total

Liquid Bulk 39% 1% 51% 9% 43%

Dry Bulk 86% 5% 0% 9% 30%

Container 33% 16% 0% 51% 15%

General Cargo 6% 3% 0% 91% 13%

Total 48% 5% 21% 26% 100%

Mode Shift Tactics at Gateway Ports

The Port of Rotterdam uses the tenant lease process to secure modal diversity. They include mode share, specifically waterway mode share, as a tenant ranking criteria:

T H E S I N G L E L A R G E S T P R O J E C T T H A T H A S A M A J O R I M P A C T O N T H E D E V E L O P M E N T O F

C O N T A I N E R C A P A C I T Y O N T H E G U L F C O A S T I S T H E E X P A N S I O N O F T H E P A N A M A C A N A L

MHy Delta in the Context of the Panama Canal

Expansion Project

West Coast Ports Handle Most of Asian Container Traffic

The west coast handles approx 75% of Asian trade with the United States. The bulk of the remaining 25% is handled by the east coast ports, via the Panama Canal.

Bulk of Asian Container Trade is Actually Land-Bridged

Three quarters of Asian container trade volumes are land-bridged across the US interior and thru the Panama Canal.

Panama Canal’s Role as a Land-Bridge is Fast Changing

The Asia-East Coast lane represents 57% of Panama Canal trade. When the canal expands, the share of Asia trade to the West coast will drop, increasing the east coast port traffic through the Canal. The result is a significant increase in container traffic through the Gulf of Mexico. The growth increment in the Asia-East Coast trade lane will be highly contestable by well positioned Gulf coast ports.

Gulf Coast will Contest the Diverted West Coast Asian Container Flows

The Panama Canal expansion presents an opportunity for additional container capacity to be developed along the Gulf coast to better serve the heartland region. Based on port expansion plans, the base of the MsCoBISC will account for 6% of US container gateway volumes by 2020.

East CoastPort Markets

Gulf CoastPort

Mkts.

West CoastPort Markets

13%

c

6%

d

7%

e

c = % US 2020 port container traffic thru Gulf Coast ports d = ports at base of Mhy Delta, e = rest of Gulf Coast ports

Key Role in Accommodating Canal Related Container Growth

The MHy Delta comes at a crucial time. The Canal project is estimated to be completed in 2014. The Gulf Coast container port expansion plans are largely to be completed by 2020.

In order to successfully serve its role in accommodating the Canal expansion container growth impact, the MHy Delta will need to be implemented over the course of the next 4-6 years.

Mhy Delta Network

• FOCUS CONTAINER

CAPACITY AT PORTS

WITH ACCESS TO

TRIPLE PLAY MODES:

• RAIL

• BARGE

• HIGHWAY

TRIPLE PLAYNational Container Port Policy

Mhy Delta Network

F O C U S E D O N T H E S U S T A I N A B I L I T Y O F S E R V I C E S .

G I V E N T H A T T H E M H Y D E L T A W I L L E S S E N T I A L L Y B E A P R I V A T E S E C T O R E N D E A V O R , I T I S C R I T I C A L

T H A T T H E P R O P O S E D A P P R O A C H B E B A S E D O N O P E R A T I O N A L P L A N S T H A T H A V E S H O W N S O M E L E V E L O F S U C C E S S O N T H E M I S S I S S I P P I R I V E R .

Proposed Operational Plan

Line Haul Segmentation

The Mississippi River is associated with long distances and disparate markets, relative to the short legs along the Rhine’s tightly spaced markers.

The most likely operations plan is a tiered service structure that is dictated by the distances and market reach of individual line-haul segments.

The proposed operational plan has a three-tiered structure that is based on existing services that have worked thus far in the Gulf region.

Tier I – Regular Fixed Schedule Services

Run between two points on a fixed regular basis; For example, once a week, on Wednesday, departing at 6pm. They work best along segments connecting with international ports serving ocean shipping lines operating on a fixed schedule basis.

The service is also most viable along segments with the highest container potential. They operate almost independent of the bulk fleet schedules, except to rely on the supply of barges and tows from the bulk fleets.

Sea Point

Mobile

Gulfport

New Orleans

Tier IRegular Fixed

Schedule Service

Cairo/Paducah

Upper Mississippi

Ohio RiverRegion

Tier II – Regular Weekly Services

Run at least once a week, without a particular time or day established. This type of service offers greater flexibility for balancing demand with supply, and is best applied to segments that do not connect with a COB gateway port.

This service is more dependent on the bulk fleet schedules, as well as the supply of barge equipment.

Sea Point

Mobile

Gulfport

New Orleans

Tier IIRegularWeeklyService

Tier IRegular Fixed

Schedule Service

Cairo/Paducah

Upper Mississippi

Ohio RiverRegion

Tier III –Inducement Services

These services are non-scheduled with the greatest flexibility for balancing demand with supply.

They are almost fully integrated into the larger bulk barge services.

Sea Point

Mobile

Gulfport

New Orleans

Tier IIIInducement

Services

Tier IIRegularWeeklyService

Tier IRegular Fixed

Schedule Service

Cairo/Paducah

Upper Mississippi

Ohio RiverRegion

Start with Bulk Fleet Integration

Long Term Growth Strategy is Also Needed

The Mississippi bulk oriented barge fleet approach to transportation service delivery is not the most ideal for providing a container barge service.

Nonetheless, what the Mississippi bulk barge loses in speed it makes up in fleet integration and adaptability.

A barge operator can provide a sustainable container barge service using bulk equipment, if it integrates the COB service into a larger bulk barge fleet

In order to develop a full-scale COB service, comparable to major rail and highway corridors, the service will likely have to grow out from the shadow of the bulk operation.

Incentives should be introduced to encourage alternative vessel technologies to the industry.

Vessel Operations Plan

MHy Delta is a Multi-Jurisdictional Project

Identify a Multi-Jurisdictional Entity

There are many aspects that impact the success of the project that are not within the jurisdiction of the State of Mississippi. Coordination of Gateway

Port Investment Decisions Cooperation of Enhanced

Mode-Share Strategies Fleet Integration and

Conversion Strategies National Security

There are several options for pursing a multijurisdictional approach. 1) State of Mississippi to

coordinate among all the entities, and across all these issues.

2) Use an existing entity that is already recognized as a multijurisdictional entity and that receives its funding from multiple entities. AASHTO?

Proposed Institutional Plan

Issue Recommendation

1. No gateway at base of Mississippi River

2. Gulf coast ports serve “truck-able” markets

3. Bulk barge tows not agile enough for container trade

4. Involves many states, ports and pvt. entities

1. Gateway development strategy & funding

2. COB plus enhanced mode-share incentives

3. Fleet integration plus fleet development incentives

4. Identify multijurisdict’lentity and fund it

Summary of Findings and Recommendations