Port expansion, and the promise of thousands of jobs, creeps closer

Delaware is moving closer to an expansion of the Port of Wilmington and the potential creation of some 5,000 new jobs.

Three proposals that would privatize the existing port on the Christiana River while adding a new container dock on the Delaware River are being evaluated by state and port officials.

Land that once housed DuPont Co.'s Edge Moor chemical production facility — and 200 jobs before it was shuttered in 2015 — is proposed for redevelopment as a new container import-export dock in the finalists' applications.

At least one of the proposals also plots the development of a logistics facility that would serve as a routing point for goods coming in and out of the port, said Secretary of State Jeffrey Bullock.

The 142-acre site of the General Motors' former Boxwood Plant near Newport has been discussed as a potential logistics facility because of rail connections to the port. The abandoned plant was recently purchased by Newport-based Harvey Hanna & Associates, which has not revealed many details about its plans for the site.

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Described as a once-in-a-generation opportunity to grow the state's blue-collar economy, Bullock hopes to send a final proposal the General Assembly in January.

"There is growing optimism that this thing might work," Bullock said. "As these respondents have gotten deeper and deeper into the potential of Wilmington, they are taking to shippers and potential new business. They are not just sitting at their desk and theorizing."

Discussions about expanding the current port on the Christina River have been going on for decades, even as the state has hemorrhaged manufacturing jobs.

Today, only about 26,000 of those jobs remain, down nearly 25 percent from 2007 and close to 50 percent from 1990.

Much of that recent decline is directly related to four plant closures: the DuPont nylon plant outside Seaford in 2003, the Newark Chrysler Assembly Plant in 2008, the GM plant in 2009 and the Claymont Evraz Steel factory in 2013.

Together, those closures eliminated more than 3,700 factory positions.

"It is a huge deal," said Rich Heffron, president of the Delaware State Chamber of Commerce. "We’re talking about 5,000 good-paying blue collar jobs, which is a good portion of the jobs we lost when the two auto plants and the steel mill closed down."

Bullock said each of the three proposals could double port-related jobs by 2027. The current port employs 2,000 people and supports a total of 5,000 jobs in the state.

"Now that we don’t have GM or Chrysler, the port is a prime example of how someone without a college degree can make a decent living and we’re trying to magnify those opportunities," said State Rep. Quinn Johnson, D-Middletown, who sits on a committee evaluating the proposals. "When you see a ship come down the channel, every one of those containers needs a truck driver and every truck needs several people to load and load it."

It's a prospect that was mixed with election-year politics in 2016 but has become more real with proposals from entities that contemplate a $500 million to $750 million investment — costs state officials want no part in paying.

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In April, the state asked potential investors to make a pitch for how they'd develop the existing port and a new facility. Through the summer, a committee made up of members of the port corporation's board and the two co-chairs of the legislature's Bond Bill Committee narrowed that pool down to three.

Their work is being conducted behind closed doors because of non-disclosure agreements with the applicants, Bullock said.

The six-member committee has consultants working to score the economic potential and viability of the three pitches. In the meantime, the committee is looking to combine aspects of the proposals into the ideal package, Bullock said.

"We should be conservative when we talk about the job increases," Bullock said. "At the same time, we have three very good proposals."

The final stage of evaluation will vet the applicants' ability to bring the state new shipping customers, a central factor in realizing the state's grand employment hopes.

"One of the things we are looking very carefully at now is who has the best track record and who has the best business plan to bring new customers to Wilmington and justify that level of investment," Bullock said.

The Applicants: what we know

Details about the proposals are scarce, including who submitted them. State officials declined to release many details, citing the non-disclosure agreements.

But each proposal seeks to meet the state's two primary goals when it set out the current effort to expand.

The new entity will take over and grow the business at the existing port, which a master plan commissioned by the port said would require $300 million in investment to meet the growing demands of the existing facility's customer base over the next two decades.

The Port of Wilmington is currently operated by the semi-public Diamond State Port Corp. The state invests about $10 million to $15 million each year into the existing facility, which often does not turn a profit.

"Is it going to need a lot of additional investment in the future? No question," Bullock said. "But that additional investment is going to bring additional opportunities to that facility that will make it more profitable and will create more jobs."

The successful applicant will also have a bankable plan to grow the state's maritime economy by building a new container facility.

Each of the finalists proposes building a new container facility at the Edgemoor property. One wants to start now. Others would start as new business dictates but no later than 2024, Bullock said.

The state bought the 114-acre Edgemoor facility, which sits on the Delaware River off I-495, for $10 million last year.

The port's master plan mapped out the potential for a new dock situated on the Delaware River to take advantage of larger ships than those that can use the current existing port on the Christina.

The addition of a new facility would require a lot of money, something Bullock said applicants have so far said they could bring.

"They bring very strong experience in operating ports, strong financial backing, and proven track records to attract business, which is essential to successfully expand the port," Bullock said.

Bullock said the applicants include international companies as well as more locally familiar businesses.

At least one of the proposals is anchored by a "very large international port operator," while others are a combination of companies that bring "strong financing" and "operating knowledge and expertise," he said.

"I think what is important in financing this activity is you have a good mix of investors, and I have no problem with investors that come from outside the United States," Bullock said.

Financing packages presented by the applicants reportedly involve traditional Wall Street and private equity investment funds as well as money from foreign outfits.

Bullock said the proposals also are being evaluated on how well they can separate state taxpayers from their current obligations to fund capital investments at the existing facility.

Ideally, he said, that would "go to zero."

"I thought finding the level of investment... would be really tough and that would be the choke point where we'd get hung up," Bullock said. "It turns out that that kind of money is available for the right project."

Where is the business?

A question that has dogged the politically-charged conversation over the port's future centers around what customers would feed an expansion, which would need to multiply the current cargoes moved by the Port of Wilmington.

"The important thing is they have to find an investor," Heffron said. "They have to get the money. If someone is confident they can make millions of dollars, obviously it’s a possibility."

Bullock said he has been encouraged by the proposals.

"It is more than theoretical," Bullock said. "They are going out there and figuring out who these new customers might be."

At the existing port, they want someone to handle the current business as well as grow it. Bullock said the port has been forced to turn new customers away because they don't have room to accommodate them.

The port's automotive berth is also underused and there is open space tied into the existing facility that could potentially be developed, he said.

Last year, the port handled about 6.8 million tons of cargo. A little more than a third of those goods were shipped in containers. The new container port contemplated by the port's masterplan at Edgemoor would triple the port's current container business.

Dennis Rochford, president of the Maritime Exchange for the Delaware River and Bay, which represents more than 300 port-related businesses throughout Pennsylvania, New Jersey, and Delaware, said traffic is increasing along the river. This year, some 2,400 vessels will transit the river, the highest number since the great recession in 2008.

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Federal officials will also complete the dredging of the Delaware River shipping channel to 45 feet next year, allowing larger ships to transit local waters. Rochford said that coupled with recent improvements to the Panama and Suez canals, mean the East Coast is in a position to take some Asian shipping business off West Coast ports.

"It puts the Delaware River in a position to be able to attract and grow the business we already have," Rochford said.

Bullock said the applicants could be able to capitalize on the natural growth of shipping traffic and possibly peel some business from larger ports in New York, Philadelphia, and Baltimore.

"Even if our slice is three times the slice we have today, it is still a very small piece of the East Coast," Bullock said.

Nightmares of the past

This isn't the first time the state has pushed a promising deal that would hand over the reins of its port business to a private company.

Houston energy-giant Kinder Morgan proposed to lease the existing port in 2013 before the deal fell apart.

One of the main sticking points was a perception among the local longshoreman's union that Kinder Morgan would gut the existing jobs and dismantle organized labor's involvement in the business.

The International Longshoremen Association represents employees that unload ships at the current port. They've long been an advocate of expanding port operations but rallied against the Kinder Morgan plan.

Bullock said the union should find the new proposals more agreeable.

"It will be an ILA facility and will be built with union labor. That has been unambiguous from the start," Bullock said. "We have had a bite of the apple of what happens when [the union] opposed the previous administration. That did not end well."

Bullock said the current situation is "night and day" from the Kinder Morgan deal. He said the unions also are considered an asset to the existing port and the larger association also brings more potential business clients to the project.

William Ashe, president of the local ILA, declined to discuss the port pitches.

"Whatever (Bullock) said, I'm behind," Ashe said.

Rather than full privatization, the current proposals would allow the state to continue owning the land while the private operator would lease the property, Bullock said.

The current effort also will seek to appease state legislators, many of whom also played a role in sinking the 2013 Kinder Morgan deal.

"It is the State of Delaware’s port," Johnson said. "Out of respect and because it is a state asset, it needs to go before the General Assembly."

If all goes to plan, the final proposal will be floated to the port corporation's full board in December before reaching the General Assembly, Bullock said.

"We are a public entity and I know in the not so distant future we need to describe in greater detail what our options are and what might be recommended to the board and the legislature for their approval," Bullock said.

Contact Xerxes Wilson at (302) 324-2787 or xwilson@delawareonline.com. Follow @Ber_Xerxes on Twitter.