Thursday, June 10, 2010

Dredging Sydney Harbour

The government of the Province of Nova Scotia announced that it would support dredging of Sydney Harbour up to $15 mn if the federal government kicked in the balance. The provincial government apparently made this announcement for political adavantage, putting the feds in the position of being the villains if they do not come up with the balance of the $38mn., and thus killing the project. [ The Cape Breton Regional Municipality that includes Sydney will chip in $2mn and Nova Scotia Power $1mn]

Tenders have aleady been received for the work, and the bidders are holding their prices until funding is found.

One wonders where the rose tinted glasses are coming from. First the dredging may have some benefit to coal imports for the power plants-larger ships will be able to deliver coal. [No one seems to be concerned that we are still burning coal and contributing to one of the largest carbon foot prints per capita in the western world!]

Second, and most relevant, is that the dredging is called for to make Sydney into a container port. This smacks of the worst form of grabbing at straws to find something for an economically depressed area to look forward to as another saviour. I can't imagine that there is a business case for a container terminal in Sydney even if the cost of dredging is not factored in. However proponents seem to think, despite winter ice conditions, and a long, slow and torturous railway route to the mainland, that a container port would bring riches untold to Sydney and Cape Breton island. Even if the province and the feds combine to make a deep water port where there isn't one now, will there be business to support a container port? Will there be private capital available to build the port or will the government(s) be on the hook for that too?

Another proposal to build a container terminal in Melford, on the Strait of Canso, has the advantage of abundant deep water (deeper than Halifax), no bridges and very little ice in most winters. Huge infrastructure costs are still present for roads, rail link to the main line and the port itself on a "green field" site. Lining up private investors for this project has proven challenging.

There is also the issue of the rail line from Sydney to Truro. The line has deteriorated since CN sold it off to short line operator Cape Breton & Central Nova Scotia. Upgrades will be costly and money will have to be "up front." The CB&CNS is not likely to finance improvements on the hope of more business.

Both ports have said that they also plan to use feeder ships to distibute containers to other ports. They are hoping that the huge post Panamax super ships, which can't enter US east coast ports due to their size, will be attracted to the new ports.

Halifax currently has a viable container port. Despite the downturn in the world economy, all the container lines that were here before the recession are still here. Volumes may be down, but the port is still doing business with all the same players, and has capacity for volume growth.

The rail connection from Halifax provided by CN has been open to criticism for years. CN does little to allay this by trying to run a scheduled railroad with trains of equal length every day. This might work if the volumes of containers to and from Halifax were equal every day - they aren't.

The effect is that the Port of Saint John has priority over the Port of Halifax with CN. The way this works is that the train leaving Halifax must be short enough so that it can pick up the Saint John traffic in Moncton. To keep the train short enough, containers are left in Halifax to go the next day or the next day. The reverse also happens, that containers destined for Halifax from Toronto or Montreal and the US mid-west can be delayed by days due to train length limitations.

CN will always be an irritant for Halifax, because its objective is to be the most profitable railroad it can be. More container traffic coming to Halifax will in fact improve the situation, because CN will have to move larger volumes and will add trains to handle it.

If Melford and Sydney become container ports, there will be an unholy jam up of cars in the Truro area, and Halifax will again be at the end of the list, since the trains leaving Halifax must be short enough to accommodate at least some of the loads from Melford/ Sydney. Eastbound trains will have the same problem.

Sydney and Melford may also chip away traffic from Montreal, since there are size restrictions on ships to that port, and ice issues in winter. Again, the time delays caused by transshipment-either by feeder ships or by rail-makes one wonder if there will be any significant traffic generated.

In conclusion-for now-these proposed container ports may take away volume from Halifax and Montreal. Why would the various governments want to promote that? The ports will have to find private capital- if there is any to be found, and they will also have to find "new" business if there is any to be found. They will also have to deal with rail issues. In short, a questionable area for government to dabble in, and one that should be left to private business to find the capital and take the risks.

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