BusinessReport.com

Ever since the big ships stopped calling, the Port of Greater Baton Rouge has been searching for meaning, seeking ways to diversify and maximize its potential as a producer of jobs and economic development.

It hasn’t been easy. Port officials, for instance, had high hopes for a container-on-barge operation on the inland waterway as an alternative to railroad and truck shipping. It fizzled, and the operator pulled up stakes—not necessarily in that order.

And state funding isn’t what it could be. Port officials also continue to be frustrated by what they see as a lack of cooperative spirit on the part of its rail-service provider, Union Pacific. But the news isn’t all bad. Deep-draft ship traffic is on the rise again, and other developments seem promising.

Heading the list of good things happening—or on the verge of happening—is the Shaw Group’s planned ethanol plant. It’s a big deal, port executive director Jay Hardman says.

One estimate that’s been tossed around is a production level of 30 million gallons of ethanol a year. To make three gallons of ethanol takes one bushel of corn, the biofuel’s primary feedstock. That means a mountain of corn floating down—or up—the river to Baton Rouge, plenty of custom for the port’s grain operation and extensive use of railroad facilities.

Revenue, in other words. Hardman can only speculate how much money the ethanol plant would bring to the port. He guesses $500,000 to $750,000 a year. The port’s budget is between $5 million and $6 million a year.

“The biofuels project is certainly one we’ve been really pleased with,” Hardman says. “We’ll do everything we possibly can to see it comes to fruition.”

If Shaw goes ahead with the project—and Hardman says he’s 99% sure it will—it will take about 15 months to build and could be operational by late 2008.

Up and running since late 2006 is a packaging and warehousing facility at the port’s inland rivers marine terminal. It handles plastic pellets for the London Metal Exchange’s plastics futures business. When it began offering futures contracts in 2005, LME designated Baton Rouge as one of two delivery sites in the United States. The pellets go into any number of plastic products.

Port spokeswoman Karen St. Cyr says luring LME took a great deal of effort on the part of Hardman and the port’s business development director, Greg Johnson, and wouldn’t have happened without the port’s Foreign Trade Zone status. FTZ designation gives foreign companies operating within them a break on U.S. Customs tariffs on foreign-sourced cargo, under certain circumstances waiving the tariffs entirely.

“The port had the right combination of site criteria for the LME,” St. Cyr says. “The combination of excellent maritime infrastructure and capacity, established foreign trade zone status along with highway, interstate and rail access made the port an ideal location.”

Hardman wants to bring in more value-added facilities like the packaging operation. This is what he has in mind for property near the inland rivers marine terminal. Hardman says it’s not unusual for delivery sites like LME’s to attract manufacturing. Companies are always looking to shorten the supply chain in order to save money, he says.

“I’d like to see raw material brought across the docks and made into finished products,” Hardman says. “This region produces enough products that we could possibly entice a manufacturer. We’re going to use whatever advantages we can.”

The magic word when it comes to value-added manufacturing is “jobs.” Hardman says the key to the port’s success is getting all its assets into play to the fullest extent possible. That isn’t happening now. The container-on-barge operation, for instance, didn’t attract enough business to keep its operator, Osprey Lines, from leaving.

One possible cause was that many barge owners scrapped their fleets for salvage, creating a shortage of barges for hire and sending the cost of shipping by barge skyward. This made the port’s container-on-barge uncompetitive with other forms of transportation. The barge line, also based at the inland marine terminal, is seeing minimal use now. Hardman says he’s in talks with a couple of potential operators as well as former customers.

“I think they’re going to try to explore the marketplace, get their comfort level up,” he says. “They need at least some base business to make it work.”

Hardman admits it’s a “chicken or egg” dilemma. Without a reliable operator the barge service won’t attract customers; without customers it’s tough to attract an operator.

“As petroleum costs continue to rise, the inland water system not only here in Louisiana but nationwide is going to be looked at lot closer,” Hardman says.

Then there’s the railroad. Hardman says the port has tried to no avail the past few years to convince Union Pacific to give “short-line” rights to the port’s switching agent. Hardman says this would give the port more control over rail car movements between its far, no luck with Union Pacific.

“We’re still chipping away at it,” he says. “It’s important for the port’s future to have control of that service.”

Finally, there’s the issue of state funding, as in not enough of it. Joe Accardo, executive director of the Ports Association of Louisiana, has plenty to say on the subject. Louisiana’s ports—state-owned entities with a proven track record for creating jobs—are nonetheless severely underfunded by the state, Accardo says.

In the past five years, PAL’s ports built $455 million in projects, with the state paying for less than 30%. The rest was paid for from the ports’ own pockets and maybe a small amount of private investment. The state’s current Port Priority Program contains $75 million in projects approved by the joint transportation finance committee, though there’s only $20 million in capital outlay money for port priority construction, Accardo says.

“There is a $55 million deficit,” he says. “If the best project in the world came up for Jay Hardman, he could not count on being funded. That’s why we say the state is not investing money in its ports.”