Expected demand for Howard Terminal as a cargo handling ... · Demand for Howard Terminal for...

Expected demand for Howard Terminal as a cargo handling facility

November 13, 2019

Contents

Section Pg.

1. Executive Summary 2

2. Bay Area (Oakland) container terminal capacity requirements 4

3. Future utility of Howard Terminal to container shipping lines 12

4. Bay Area requirements for and supply of Roll-on/Roll-off terminal capacity 18

5. Bay Area requirements for and supply of dry bulk terminal capacity 28

2

Demand for Howard Terminal for marine cargo operationsExecutive Summary

The 2019-2050 Bay Area Seaport Forecast prepared by the Tioga Group for the SF Bay Conservation and Development Commission (BCDC)projected future volumes, under alternative growth scenarios, for three primary categories of Bay Area port cargo traffic:

▪ Containers, which all move through the Port of Oakland presently (and are assumed to continue doing so).

▪ Roll-on/Roll-off (RoRo) traffic, which is predominantly comprised of automobiles and light trucks, and which presently flows principallythrough three terminals (located in Benicia, Richmond, and San Francisco).

▪ Dry bulk traffic, comprised of several commodities – the most important of which are construction aggregates – and presently moving mainlythrough terminals in Richmond, San Francisco, and Redwood City.

Tioga Group estimated the aggregate annual capacity of the relevant terminals for each of these three commodity groups and then comparedits volume projections for all three commodity groups with those capacities.

Tioga Group subsequently concluded that by 2050, under its moderate or strong growth scenarios, there would be a need for additionalterminal acreage in the Bay Area to be able to handle the projected container traffic, RoRo traffic, and dry bulk traffic – this led to theimplication that there should still be demand for Howard Terminal to function as a marine terminal for at least one of these cargo types.

Mercator briefly reviewed Tioga Group’s volume forecasts and found these projections to be reasonable for the container and RoRo traffic(with long-term growth rates in its moderate scenarios of 2.2% for containers and 1.0% for RoRo cargoes).

▪ The projections for construction aggregates appeared to be relatively more aggressive.

However, rather than construct a detailed, quantitative critique of Tioga Group’s aggregates projections, Mercator instead conductedindependent analyses of terminal capacities that could be available in the Bay Area in each of these three commodity groups by 2050. Basedon our capacity analyses and projections, we concluded as follows:

▪ There should be no need or demand for Howard Terminal to handle RoRo ships and traffic by or before 2050 under either Tioga’smoderate or strong growth scenario – it is also poorly located and configured to serve as a RoRo marine facility.

▪ The same should be true for construction aggregates – Howard Terminal should not be needed for this cargo type by or before 2050, givenother available alternative facilities.

▪ There should also be no need for Howard Terminal to handle containerships by or before 2050 under Tioga’s moderate growth scenario.Even in the strong growth scenario, Oakland’s other terminals should be sufficient.

• Moreover, there will likely only be a few containership services, covering niche trades with small ships, operating in future years to the Port thatcould even physically be accommodated at Howard Terminal.

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4

Meeting container terminal capacity requirementsBackground

The 2019-2050 Bay Area Seaport Forecast prepared by the Tioga Group for the SF Bay Conservation and Development Commission (BCDC)states that Howard Terminal may be necessary to meet container handling capacity and acreage requirements, under moderate and strongcontainer volume growth scenarios.

More specifically, Tioga Group projects container throughput for the Port of Oakland to reach nearly 5.2 million TEUs by 2050, under itsmoderate growth scenario

▪ This is slightly more than twice the Port’s throughput in 2018, and represents a CAGR of 2.2%

▪ For the strong growth scenario, Tioga’s projected throughput is about 7.0 million TEUs by 2050, with a 3.3% CAGR

Because Tioga Group estimated the Port’s future aggregate capacity at 5.3 million TEUs/year without Howard Terminal (but with existingterminals improved and with higher productivity levels), the firm concluded that the Port would need the terminal for container shipoperations, even in the moderate growth scenario.

However, as Mercator’s independent assessment demonstrates further in this section, terminal capacity benchmarks (i.e. TEU/acres) currentlyachieved by most container terminals in the U.S. West Coast -- the container market in which Oakland is competing -- are already greater thanthe assumptions that Tioga Group used in the 2019-2050 Bay Area Seaport Forecast to estimate port container capacity.

In addition, there are operating strategies that ocean carriers and terminal operators could employ in the future to gain sufficient incrementalcapacity to handle the volumes in the strong growth scenario.

The following pages lay out Mercator’s independent analysis of this issue.

5

Port of Oakland facilities Terminal area in acres

The first step of Mercator’s independent assessment was to generate our own estimates of gross terminal areas. Based on the property limits defined in thePort of Oakland’s Seaport Facilities Plan, Mercator proceeded to map the polygons of each property in the port and estimated the acreage of each polygonusing Google Earth, as illustrated in the following figure.

Oakland terminal acreages (Mercator, 2019)

77

23123

290

80

85

237

75

207 27 50

43

61

29

39

28

37

78

5

145

25

124

26

17

acres

Ben Nutter

Berths 33-34

TraPac

OHT Berths 20-21

OHT Berths 22-24

OICT

Matson Howard

*Seaport Facilities. Port of Oakland, https://www.portofoakland.com/files/PDF/PoOak_Dec%202017_Seaport%20Map.pdfAreas calculated by Mercator using the most recent imagery available (i.e. Oct 2018) on Google Earth.

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https://www.portofoakland.com/files/PDF/PoOak_Dec%202017_Seaport%20Map.pdf

Port of Oakland container terminalsAcreages available and in use

Oakland terminal acreages (Exhibit 4, Tioga, 2019) Oakland terminal acreages (Mercator, 2019)

The tables below aim to reconcile the acreage utilized in the 2019-2050 Bay Area Seaport Forecast report with Mercator’s independent assessment,identifying the following discrepancies:

▪ Berths 33-34—Mercator estimated 23 acres, as opposed to 20 acres in the Tioga report.

▪ Roundhouse—Mercator estimated 27 acres, as opposed to 20 acres in the Tioga report.

▪ Off-dock and former Oakland Army Base (OAB) areas—Mercator estimated at least 173 acres (as detailed in the previous slide) as opposed to 126 acresin the Tioga report; furthermore, the Port of Oakland reports at least 168 acres in its Seaport Facilities Guide.

Terminal/area Acres2019 Acres

in useAvailable

acresBuild-out

acres

Ben Nutter 77 77 0 77

Berths 33-34 23 23 23

OICT 290 290 0 290

TraPac 123 123 0 123

Matson 75 75 0 75

Roundhouse 27 27 27

OHT Berths 20-21 26 26 26

OHT Berths 22-24 124 124 124

Howard 50 50 50

Subtotal 815 565 250 815

Without considering off-dock properties, Mercator estimates an additional 10 acres of container terminal facilities in Oakland. This small discrepancy does not,however, have a significant impact on conclusions.

The key concern with the Tioga Group’s analysis is its method of estimating future capacity, as discussed on the next slide.

7

Note: 195 “post electrification” acres appears to be a typo. Error. Should be 793 acres.

Container terminal capacity estimates and referencesThe 2019-2050 Bay Area Seaport Forecast report productivity benchmarks

The Tioga forecast of future capacity was extrapolated from current “claimed capacities” or actual throughput of a selection of terminals. Capacity orthroughput was divided by current acreage to arrive at estimated annual “productivity” as measured in TEUs/acre per year. “Productivity” was thendiscounted by 20% to arrive at the future capacity. There are a number of shortcomings to the methodology employed:

• Current operations and layout are often not “capacity optimized”, with significant terminal area still dedicated to chassis parking and other low-density uses.

• The application of a 20% discount is arbitrary and no support for such discount is provided. Mercator prefers to simply calculate achievable capacities usingconservative assumptions and not employ such a reduction factor.

• Current throughput per acre does not, in most cases, tell what is achievable, but rather provides more information about current demand.

These calculations from the 2019-2050 Bay Area Seaport Forecast report are illustrated in the tables below.

Terminal capacity benchmarks (Exhibit 85, Tioga, 2019) Oakland capacity benchmarks (Exhibit 86, Tioga, 2019)

As will be demonstrated in the subsequent pages, Mercator’s capacity calculations show that a great many container terminals in the U.S. West Coast arealready exceeding not only the short-term assumption estimated in the Tioga report, but also the assumptions utilized for the long-term estimates.

Because what matters for planning is the long range potential for Bay Area terminals, it is reasonable and correct to assume that current terminals will beimproved over the next 20-30 years as capacity requirements grow, such that an assessment of the sufficiency of future capacity must be made based onexpected future throughput performance, not current performance based on current layouts and processes

8

Some assumptions in Exhibit 85 have subsequentlychanged or were not accurately accounted for originally:LBCT will be at least 305 acres by 2021 and will likely ableto handle at least 4 million TEUs. GCT Bayonne is nearly170 acres.

Capacity of container terminals in the U.S. West CoastMercator’s capacity calculations and assumptions

Mercator conducted a bottoms-up analysis to calculate the capacity of container terminals on the U.S. West Coast to both establish the current range ofthroughput capacity intensity, and to define what could be achieved if older terminals are upgraded to modern standards with higher-density stacking. Thecore long-term capacity constraint for container terminals is normally land area and storage capacity, and thus for this analysis, we focus on that constraint.[The capacity across the berth is normally a function of the number of cranes installed and deployed, which is more easily adjusted over time than is theamount of land available to the terminal, and so is not likely to be the long-term constraint.]

Our analysis considered the area available, the number of ground slots, and the container stack height for each type of storage mode / equipment (i.e. RTG,top loader/empty handler, wheeled, ASCs, or strads) to calculate the maximum static capacity of the container yard, a simple volumetric measure ofcapacity if each storage position was occupied. The max static capacity is reduced by the peak / average inventory factor to account for seasonal peaks onthe demand for storage, and reduced by the allowable occupancy % to arrive at the allowable average inventory that can be accommodated at the terminal.

Dividing working days per year by average dwell time gives the annual turnover/year, which is multiplied by the allowable average inventory to calculate theactual storage-constrained annual throughput capacity of the terminal.

The table below documents the assumptions utilized by Mercator to estimate the capacities of container terminals in the U.S. West Coast.

Mercator assumptions by port to estimate capacities of each container terminalContainer terminals in the U.S. West Coast

NWSA -Seattle▪ T-18 - SSA▪ T-46 - TTI▪ T-30/25 - SSA▪ T-5 - Vacant

NWSA -Tacoma▪ PCT - Evergreen▪ WUT - Hyundai▪ Husky Terminal - ITS

Oakland▪ TraPac OAK▪ OICT▪ Everport (Ben Nutter)▪ Berths 20-24 OHT

Port of Los Angeles▪ Pier 400 - APMT▪ Pier 300 - FMS (ex GGS)▪ Everport▪ Yusen Terminal Inc▪ WBCT - COSCO YML▪ TraPac LA

Port of Long Beach▪ Pier T - TTI▪ LBCT▪ Pier A▪ Pier J▪ Pier G – ITS▪ Pier C

Model inputsPort of

OaklandSan Pedro

Bay NWSAUnits

Peak inventory / Avg invent Times 1.25 1.25 1.25

Allowable Occup. % full 65% 65% 65%

Avg dwell time / container Days 5.0 5.0 5.0

Working days/year Days 360 360 360

Stack heights by storage / handling mode:

RTG box 4.3 4.3 4.3

Toploaders / Empty Stackers box 4.5 4.5 4.5

Wheeled box 1.0 1.0 1.0

ASCs box 5.0 5.0 5.0

Strads box 3.0 3.0 3.0

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Container terminal capacity estimates and referencesMercator’s container terminal area, capacity, and productivity estimates

With the methodology described on the previous page, Mercatorestimated the current storage-limited capacity (in TEUs/Year) forthe USWC terminals based on current yard layouts and storagemodes.

As demonstrated by this analysis, more than two-thirds of U.S.West Coast terminals already have capacities beyond 7,000TEUs/acre. The median capacity is 8,000 TEUs per acre (i.e. 50%have capacity of this much or more), 25% have capacity of 8900or more, and 10% have capacity above 10,000 TEUs per acre.

This analysis indicates that achieving throughput capacity inexcess of the 7,000 TEU/acre that was assumed in the Tiogacapacity vs demand analysis is feasible, even withoutautomation.

As container ship sizes and throughput volumes increase,Mercator expects that terminals in Oakland – as well aselsewhere the West Coast – will be upgraded to employ higherdensity stack configurations that support higher annualthroughput per acre.

On the next page, we present current and expected futurecapacity metrics for Oakland terminals.

Mercator’s container terminal area, capacity, and productivity (TEU/Acre) estimates

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Port Terminal Gross area Est. Capacity TEU/Acre

Acres TEUs/Year (Capacity)

NWSA -Seattle T-18 - SSA 196 1,560,000 7,960

T-46 - TTI 82 690,000 8,410

T-30/25 - SSA 70 550,000 7,860

T-5 - Vacant 185 1,700,000 9,190

NWSA -Tacoma Pierce County - Evergreen 140 950,000 6,790

WUT - Hyundai 123 880,000 7,150

Husky Terminal - ITS 146 1,310,000 8,970

Oakland TraPacOAK* 123 716,000 5,820

OICT 290 2,338,000 8,060

Everport (Ben Nutter) 77 616,000 8,000

Berths 20-24 OHT 150 606,000 4,040

Los Angeles Pier 400 - APMT 484 3,242,000 6,700

Pier 300 - FMS (ex GGS) 332 4,160,000 12,530

Everport 204 2,046,000 10,030

Yusen Terminal Inc 185 1,662,000 8,980

WBCT - COSCO YML 132 1,189,000 9,010

WBCT - YML COSCO 186 752,000 4,040

TraPac (conv part) 80 218,000 2,730

TraPac (automated part) 140 1,439,000 10,280

Long Beach Pier T - TTI 385 3,286,000 8,540

LBCT 305 3,211,000 10,540

Pier A 159 1,320,000 8,290

Pier J 256 1,607,000 6,280

Pier G - ITS 246 2,071,000 8,420

Pier C 70 299,000 4,270

Mean 7,716

Median 8,060

Upper Quartile 9,010

Upper 10% 10,280

Everport LA now reflects new capacity consistent with expanded 204 acre area.

Container terminal capacityMercator’s container terminal area, capacity, and productivity estimates: existing vs future

The first table below shows the current ground slots, static capacity and estimated annual capacity of the four active container terminals in Oakland. With their currentlayouts and operating schemes, these terminals have an annual capacity on the order of 4.0 million TEUs per year, equating to an average throughput capability of about6,700 TEUs per acre. The inactive OHT terminal (Berths 20-24) is excluded.

In the lower table, we summarize the ground slots and static capacity that could be achieved if a higher-density operating scheme was employed at each of the activeterminals, if the idle acreage adjacent to the Nutter and Matson terminals is brought back into service, and if the OHT terminal is renovated and brought into service. Thisscenario assumes fewer acres dedicated to containers stored “on wheels”, as well as reduced areas set aside for bare chassis storage. With these changes, the capacity of theOakland container terminals would increase to about 7.2 million TEUs per year over 642 acres, with average TEUs/acre just above 11,000. This level of throughput densitywould be at the upper end of what is observed for current terminals.

Oakland existing capacity

Oakland high-density (future) capacity

Terminal Gross area Ground slots Max static capacity Est. Capacity TEU/Acre

Acres TGS TEUs TEUs/Year (Capacity)

TraPacOAK 123 7,204 19,144 716,000 5,800

OICT 290 17,522 62,424 2,338,000 8,100

Everport (Ben Nutter) 77 6,164 16,470 616,000 8,000

Matson 75 6,000 7,800 375,000 5,000

Oakland existing 565 36,890 105,838 4,045,000

Avg 6,725

Median 6,900

Terminal Gross area Ground slots Max static capacity Est. Capacity TEU/Acre

Acres TGS TEUs TEUs/Year (Capacity)TraPacOAK 123 9,806 40,006 1,498,000 12,200

OICT 290 20,274 86,241 3,228,000 11,100

Everport (Ben Nutter) 100 7,904 30,712 1,150,000 11,500

Berths 20-24 OHT 150 13,610 49,025 1,836,000 12,200

Matson+Roundhouse 102 8,160 21,787 1,020,000 10,000

Oakland high density 765 59,745 227,721 8,732,000

Avg 11,400

Median 11,500

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Throughput analysisMercator’s container terminal area, capacity, and productivity estimates: existing vs future

▪ In the table below, we compare the estimated current and future capacities of the four main Oakland container terminals with the moderate and highcase forecasts of Tioga Group for the BCDC.

▪ In the future scenario, we have assumed a renovated OHT terminal, expanded Everport and Matson terminals, and a reduction in wheeled container andchassis storage.

Mercator throughput analysis by terminal

Terminal Estimated Current and Future Container Capacity

Assumed productivity in TEUs/acre Existing -no

Improvements Future-with

Improvement TraPacOAK* 716,000 1,498,000 OICT 2,338,000 3,228,000 Everport (Ben Nutter) 616,000 1,150,000 Berths 20-24 OHT 716,000 1,836,000 Matson (+Roundhouse for future) 375,000 1,020,000

Total 4,761,000 8,732,000

Moderate Case Forecast 2050 5,187,600 5,187,600

Surplus / (Shortfall) (426,600) 3,545,400

Utilization 109% 60%

High Case Forecast 2050 7,038,600 7,038,600

Surplus / (Shortfall) (2,278,600) 1,694,400

Utilization 148% 81%

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With the referenced changes in operating mode and the return to service of idle container terminal areas (OHT, Everport, Matson), Oakland should clearlyhave sufficient capacity to accommodate the moderate growth forecast of Tioga Group without the need to operate the Howard Terminal.

Moreover, there are additional options for increasing the Port’s container capacity above 7.2 million TEUs by or before 2050 – without Howard Terminal –that would enable Oakland to comfortably handle the volumes of the strong growth scenario. These options could include further reductions in thenumbers of wheeled parking slots in the terminals, implementation of short-haul shuttle trains to evacuate import loads destined to consignees in metroSacramento, the Central Valley, and Reno immediately upon vessel discharge (to reduce average dwell times), new densification/automation technologies,and block-chain initiatives to reduce dwell times.

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13

Liner service demand for the Howard TerminalIntroduction

▪ The objective of this section is to provide Mercator’s assessment of the commercial utility of the Howard Terminal in the future as a facility forstevedoring containerships

▪ In its recent study for the San Francisco BCDC, Tioga Group assumed a capacity of just under 360,000 TEUs/year for the Howard Terminal (if retained forcontainership handling), based on an assumed unit capacity of about 7120 TEUs per acre per year times the Terminal’s 50 acres

▪ However, Mercator’s view is that key infrastructure parameters of this terminal sharply diminish its commercial utility to – and demand from – oceancarriers

• Hence, the effective, commercially useful capacity of Howard Terminal is far less than assumed by Tioga Group

▪ Mercator will attempt to explain, in the next several pages, why the Howard Terminal will likely be usable by only a few liner shipping services in thefuture, after one takes into account the terminal’s infrastructure limitations and the current and expected evolution of the containership services callingthe Port

• In doing so, we first review and comment on the current array of liner shipping services that call the Port

▪ Our analysis will suggest that the Terminal will have commercial and physical viability only for liner shipping services that are operated with relativelysmall ships (of less than 4000 TEU of nominal capacity) and which are designed for secondary, niche container trade markets (such as the South PacificIslands)

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Liner shipping services calling the Port of OaklandGeographic composition

▪ The Port of Oakland presently receives regularly-scheduled containership services that are operated in five navigational corridors:

▪ Clearly, the Transpacific North Corridor provides the largest number of liner services calling at the Port of Oakland, which reflects the fact thatimports from and exports to Northeast/Southeast Asia comprise nearly 80% of the Port’s container traffic

• Three of the sixteen services extend from California to Northeast/Southeast Asia to Europe via the Suez Canal, although the ships in thoseservices carry relatively small volumes of Europe – California containers (as the Panama Canal/Transatlantic corridor is a shorter route)

▪ It is highly unlikely that over the next thirty years, a regularly-scheduled liner shipping service will be launched in a completely newnavigational corridor to and from Oakland

• Containerships that might link the Indian Subcontinent/Arabian Gulf with California would logically pass through the South China Sea/Strait of Malacca,and thus, even if carriers wanted to operate liner services running directly to the ISC/Arabian Gulf, they would also call ports in Southeast Asia

• This would also be the case if carriers wanted to operate liner services between California and East/South Africa -- such services would also passthrough the South China Sea and the Strait of Malacca

• The volume of container trade between the West Coast of North America and either the East Coast of South America or West Africa is unlikely toincrease to a level that would incent a shipping line to operate a direct (non-relay) service via the Panama Canal to and from either of those regions

• Carriers serving the State of Alaska from the Puget Sound are very unlikely to extend their vessel services to/from Northern California

Corridor Offshore Regions Served Number of Weekly Vessel Services

Transpacific North NE Asia, SE Asia 16

Transpacific South Australia/NZ, South Pacific 1.5

Mid-Pacific Hawaii 3

North/South Americas Pacific Coast Mexico, Central America,South America

1

Panama Canal/Transatlantic North North Europe, Mediterranean 3

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Liner shipping services calling the Port of OaklandCarrier composition

▪ Presently, only fourteen ocean carriers operate liner shipping services that call the Port of Oakland – ten of those carriers run theirNortheast/Southeast Asia services in four alliances

Alliance and/or Carrier Offshore Regions Served # of Weekly Vessel Services @ OAK

Ocean Alliance (COSCO, CMA, Evergreen) NE Asia, SE Asia 6

THE Alliance (Hapag Lloyd, ONE, Yang Ming) NE Asia, SE Asia, North Europe 5 – Transpacific1 – North Europe

2M Alliance (Maersk, MSC) NE Asia, SE Asia 2

Wan Hai/PIL vessel sharing agreement (with COSCO) NE Asia, SE Asia 1

Hyundai Merchant Marine NE Asia, SE Asia 1

APL (subsidiary of CMA) NE Asia 1

Oceania Alliance (Maersk, CMA, Hapag) Australia/New Zealand 1

Maersk/Polynesia Line vessel sharing agreement South Pacific Islands 0.5

MSC Latin America, Mediterranean 1

Hapag Lloyd/Maersk vessel sharing agreement Latin America, Mediterranean 1

Maersk Mexico, Central America, WC South America 1

Matson Hawaii 2

Pasha Hawaii 1

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Liner shipping services calling the Port of OaklandSize composition

▪ All of the Transpacific North (Asia) liner services presently calling the Port of Oakland use ships with capacities of 6500 TEUs or greater, as shown inthe table below

▪ The sizes of ships assigned to Asia – California liner services have been steadily increasing over the past forty years, and are expected to continuedoing so

▪ All sixteen of these services employ ships that are too large to be efficiently accommodated at the Howard Terminal, given the latter’s currentinfrastructure and its alongside water depth of 12.8m/42 feet

▪ Even if additional Asia – California liner services call in Oakland in the future, they are unlikely to use ships small enough for Howard Terminal

▪ Thus, without dredging the berth, modifying the wharf, and making other major improvements, the Howard Terminal is unlikely to be in demandfrom ocean carriers for handling their Asia liner services

Size Distribution of Asia Vessel Services Calling Oakland

Alliance and/or Carrier

OCEAN Alliance Vessel Service Name PSW-1 PSW-2 PSW-3 PSW-5 PSW-7 PSW-8

Avg Vessel Size (TEUs) 14000 13000 9500 8500 6500 8500

THE Alliance Vessel Service Name PS-1 PS-3 PS-4 PS-6 PS-7

Avg Vessel Size (TEUs) 9000 6500 6500 9000 10000

2M Alliance Vessel Service Name TP-2 TP-8

Avg Vessel Size (TEUs) 13500 11000

Wan Hai/PIL VSA Vessel Service Name TP Loop 2

Avg Vessel Size (TEUs) 11500

Hyundai Vessel Service Name PS-2


APL Vessel Service Name EX-1


**************** Vessel Services ************

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Size distribution of Asia vessel services calling Oakland

Liner shipping services calling the Port of OaklandSize composition

▪ With one exception (MSC’s service between the Mediterranean andthe West Coast of North America), the liner services presently callingat the Port of Oakland for the non-Asian trades utilize ships withdimensions and water drafts that can be accommodated at theHoward Terminal

▪ However, two of the remaining seven services are operated byocean carriers that have ownership stakes in concessions elsewherein the Port

• The ONE carrier will want the AL-5 North Europe service to continuecalling at the TraPac Terminal, rather than shift it to the HowardTerminal

• Matson will want its twice-weekly shuttles to and from Hawaii tocontinue calling at its own Oakland terminal, rather than shift back tothe Howard Terminal, which has much less acreage (50 versus 80acres)

▪ Maersk, CMA, and Hapag Lloyd would likely resist shifting theirOceania service to the Howard Terminal, while Hapag and Maerskwould likely resist shifting their Mediterranean service, unlessabsolutely necessary, for a few key reasons:

• OICT, where both services call presently, is a far superior terminal

• All three carriers have other services calling at OICT and prefer tominimize the number of separate terminals that they use in the sameport, to control their landside costs

• Both services will eventually be upsized with ships that are too largeto be handled efficiently at Howard Terminal

▪ If suitable berth windows and terminal capacity were not available atother terminals in the Port, Maersk might be willing to assign its twosmall-ship niche services (WCCA-2 and the South Pacific service) toHoward Terminal, and Pasha might be willing to do likewise

▪ Hence, Howard Terminal’s long-term utility as a containership-stevedoring facility is likely to be confined to handling one to threesmall-ship, niche trade liner services

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Size Distribution of "Non-Asia" Vessel Services Calling Oakland

Vessel Service Name

VSA and/or Carrier Offshore Regions Served Avg Vessel Size (TEUs)

Maersk/CMA/Hapag Australia/New Zealand Oceania

4200

Maersk/Polynesia Line South Pacific Islands South Pacific*

1400

Hapag/Maersk Latin America, Mediterranean MPS

4700

MSC Latin America, Mediterranean California Express

8500

Hapag/ONE/Yang Ming Latin America, North Europe AL-5

5000

Maersk West Coast Latin America WCCA-2

1800

Pasha Hawaii CHX

2400

Matson Hawaii Hawaii shuttles**

2000 - 2800

Size distribution of Non-Asia vessel services calling Oakland

Commercial utility of Howard Terminal for containership operationsSummary

▪ Mercator would estimate the potential, commercially viable demand in the future (i.e., after 2024) for Howard Terminal’s capacity as follows:

• Hawaii trade (Pasha service)

• Approximately 40,000 TEUs (20% of effective capacity of CHX service x 52 weeks x 2 (WB + EB))

• Central America trade (Maersk service)

• Approximately 45,000 TEUs (30% of effective capacity of WCCA-2 service x 52 weeks x 2)

• Pacific Islands trade (Maersk(Hamburg Sud)/Polynesia Line service)

• Approximately 30,000 TEUs (50% of effective capacity of South Pacific service x 24 sailings x 2)

▪ Thus, if an operator of Howard Terminal were able to secure all three of these services, we would expect the facility to handle approximately 115,000TEUs per year.

▪ However, it is highly unlikely that the Terminal would be profitable to operate, with such a low level of throughput.

▪ Consequently, Howard Terminal will continue to have highly limited commercial appeal to the vast majority of ocean carriers and their associated linershipping services that can be expected to call in Oakland in the future, and concurrently will continue to have minimal appeal to for-profit terminaloperating companies as a concession.

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Demand for/utility of Howard Terminal for RoRo cargoesIntroduction

▪ The objective of this section is to provide Mercator’s assessment of the commercial need for and utility of the Howard Terminal in the future as a facilityfor handling RoRo ships and cargoes, which consist primarily of automobiles and light trucks.

▪ At present, the Port of Oakland handles very few RoRo-ships, and these are generally received on an ad-hoc basis, transporting project cargoes (asopposed to regular, scheduled calls of RoRo ships carrying high volumes of new vehicles).

▪ There are, however, four other ports/terminals in the San Francisco Bay/Suisin Bay at which RoRo ships make frequent calls and discharge and/or loadhigh volumes of imported and/or exported automobiles and trucks – in Benicia, Richmond, Antioch, and San Francisco.

▪ In Exhibit 155 of its recent study, Tioga Group derived a collective throughput capacity of 467,100 vehicles per year for the Bay Area’s RoRo terminals,based on an assumed unit capacity of 2,173 vehicles per acre per year times an estimated 215 acres of RoRo terminal space.

▪ Tioga Group also forecasted unconstrained future RoRo volumes for the Bay Area by 2042 to be 476,000 vehicles (moderate growth scenario) or 590,000vehicles (strong growth scenario), and hence concluded that there should be a need for Howard Terminal as a RoRo facility in the future.

▪ However, Mercator’s view is that Tioga Group has significantly underestimated the current and potential future capacity of Bay Area ports for RoRotraffic.

• Consequently, we conclude that Howard Terminal will not be required to handle RoRo volumes in the future.

▪ Mercator will explain, in the next few pages, why the Howard Terminal’s acreage will not be needed to handle the Bay Area’s future RoRo traffic forseveral decades ahead.

21

Brief overview of current Bay Area RoRo terminalsFour existing facilities dedicated to vehicle imports/exports

Locations of active Bay Area RoRo terminals

22

A

D

C

B

▪ A—Port Benicia Terminal, a private facility owned and operated by Amports on freehold land.

▪ B—Antioch Terminal, a private facility owned/operated by Amports, on private, leased land.

▪ C—Point Potrero Terminal, operated by Auto Warehousing Company (AWC), on land leased from the City of Richmond.

▪ D—Pier 80 Terminal, operated by Pasha Automotive, on land leased from the Port of San Francisco.

Overview of current Bay Area RoRo terminalsBenicia Port Terminal Company (BPTC)

Aerial view of BPTC (auto storage areas in red)

23

Source: Google Earth with areas defined and acreage calculated by Mercator.

▪ BPTC is the largest RoRo terminal in the Bay Area, with 200 acres (as measured by Mercator) of usable paved storage for vehicles, with more landwithin the sprawling 700+ acre terminal that could be developed.

▪ Tioga Group assumed BPTC’s usable acreage for vehicle storage at only 75 acres (Exhibit 155) – a difference of 125 acres.

▪ The facility has direct, on-dock rail service, provided by Union Pacific (UP), and is adjacent to UP’s Oakland – Sacramento main line.

▪ BPTC also has about 140,000 SF of on-dock buildings for vehicle processing functions requiring weather protection.

▪ BPTC is operated by Amports (a holding of Instar AGF Infrastructure Fund), on land owned by Amports.

Overview of current Bay Area RoRo terminalsAntioch Terminal

Aerial view of Antioch Terminal

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Source: Google Earth (June 26, 2018) with areas defined and acreage calculated by Mercator.

▪ This is the newest RoRo terminal in BayArea, with eventually 107 acres (asmeasured by Mercator) of usable pavedstorage for vehicles.

▪ The facility was developed on the site of aformer paper products factory, closed in2002, which a real estate developerspecializing in brownfield projects acquiredand remediated.

▪ Amports leased the property in 2017, andbegan vehicle storage operations there in2018.

▪ As the aerial photo to the left indicates, thefacility already has a significant volume ofvehicles in storage.

▪ The berth is being refurbished and Amportsexpects to handle RoRo ships here by 2020.

▪ The terminal will have on-dock rail access,with proximity to the BNSF main line.

▪ Tioga Group did not include the AntiochTerminal in its calculations of Bay AreaRoRo terminal capacity.

▪ Tioga Group assumed that Amports will usethis Antioch facility to transferdomestically-produced vehicles from or tomulti-level railcars, because of its 35-footwater depth (although that is comparableto the water depth at Richmond).

Overview of Current Bay area RoRo terminalsPoint Potrero Marine Terminal – Port of Richmond

Aerial view of Point Potrero

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▪ This terminal has been utilized for RoRotraffic for a few decades.

▪ Although its backlands are irregularlyshaped, the terminal has 80 paved acresavailable for vehicle parking and storage(as estimated by Tioga Group andcorroborated by Mercator).

▪ The terminal is bounded on itsnorthwest side by a steep hill and on itswest side by residential developments,so its expansion opportunities arelimited and dependent on theclosure/sale of a private terminalimmediately to the north.

▪ The terminal has multiple on-dock railtracks for the loading/unloading ofmulti-level railcars, and service isprovided by BNSF.

▪ The terminal also has structures on-sitefor vehicle processing.

▪ Pier 80 was originally used forcontainerships in the 1970s but afterthe container business shifted toOakland, the Port pursued break-bulk/general cargoes for thisterminal, with intermittent success.

▪ In late 2016, Pasha Automotive wasable to lease the facility for RoRooperations for a 15-year term.

▪ It has approximately 60 acresavailable for vehicle parking/storage,plus two large on-dock warehousesthat can be used for vehicleprocessing activities.

▪ The terminal has a rail spur track, butits configuration makes it time-consuming to deliver and pull railcarsto and from Pier 80.

Aerial photo of Port of San Francisco – Pier 80

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Overview of current Bay Area RoRo terminalsPier 80 – Port of San Francisco

Current Bay Area RoRo terminalsCollective terminal capacity for RoRo traffic

▪ A summary comparison of acres available for vehicle parking/storage (which defines the terminal’s throughput capacity) for the Bay Area’s dedicatedRoRo facilities is presented in the table.

▪ Using Tioga Group’s estimate of achievable land productivity of 2,173 vehicles per acre (by 2030), the aggregate capacity of these four terminalsshould be in the range of 970,000 vehicles per year.

• This capacity level is over 50% greater than the volume of import/export vehicles projected for the Bay Area by 2050.

▪ Moreover, Mercator’s analyses of RoRo terminals in other ports suggests that it should be feasible to achieve land productivity rates in the range of2,400-2,500 vehicles per acre, which would result in well over 1 million units of annual capacity.

▪ In addition, even if more RoRo marine terminal capacity is required in the region beyond 2050, there are likely to be other options available besidesthe use of Howard Terminal.

▪ Annual vehicle capacity of existing terminals would exceed 1 million vehicles at throughput of 2,400 vehicles per acre, far in excess of the expectedrequirement.

Terminal Tioga Estimates Mercator Estimates

Acres Acres

Port Benicia 75 200

Antioch 0 100

Potrero/Richmond 80 80

Pier 80/San Francisco 60 60

Total Acres 215 440

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Bay Area RoRo TerminalsSelected capacity expansion options for Bay Area RoRo traffic

▪ One option for adding RoRo terminal capacity in the Bay Area, if required,would be to adapt the Port of San Francisco’s Pier 96 terminal.

• This facility was originally designed for handling containerships but ceasedreceiving liner service calls in 2005.

• Some aggregates/construction materials and project cargoes are handledhere, but the facility is highly under-utilized.

• Approximately 45-50 acres could potentially be converted here for RoRo shiphandling and vehicle marshalling.

• Pier 96 also has more efficient rail access than Pier 80.

▪ Tioga Group acknowledged the possibility of Pier 96 as an option for addingRoRo terminal capacity for the Bay Area.

Aerial photo of Port of San Francisco – Pier 96

▪ There are also under-utilized and/or undeveloped land parcelsproximate to Amports’ Antioch facility that could conceivablybe acquired and developed to expand the terminal.

• The locations of these parcels are shown in yellow in the aerialphoto to the left.

Aerial view of Antioch Terminal

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▪ Current Bay Area RoRo volumes are under400,000 vehicles per year.

▪ In its high-growth scenario, Tioga Group forecaststhose volumes to increase to about 611,000vehicles per year by 2048.

▪ The Bay Area’s dedicated RoRo terminals shouldhave a collective capacity of about 970,000vehicles per year by 2021 (after Antioch is fullyoperational).

▪ Even if Antioch’s capacity is discountedconservatively by 50% (to allow for constraints onthe sizes of RoRo ships able to call the facility), thefour terminals would still have a collectivecapacity of over 860,000 vehicles per year.

▪ Considering that even the discounted capacity farexceeds projected demand (in the aggressivevolume growth scenario) by over 40%, and thatadditional capacity can be obtained at Pier 96 inSan Francisco (and probably at Antioch as well),there should be no need or demand for HowardTerminal to handle RoRo ships for at least thenext 40 years.

Aerial Photo of Howard Terminal

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The need for Howard Terminal as a RoRo facilityConclusions

Contents

Section Pg.






30

▪ The objective of this section is to provide Mercator’s assessment of the commercial need for and utility of the Howard Terminal in the future as a facilityfor handling exports/imports of dry bulk cargoes.

▪ By definition, dry bulk cargoes are poured into or scooped out of ships with specialized equipment and conveyor systems, and the ships carrying thesecargoes are quite different in design from container ships, RoRo vessels, break-bulk ships, or liquid bulk (tanker) vessels.

▪ The highest-volume dry bulk cargoes in global shipping are coal, iron ore and grain, and these commodities tend to move primarily through specializedmarine terminal facilities that can efficiently receive and unload or load unit trains of hopper cars.

▪ Howard Terminal could not feasibly be converted into and utilized as an efficient, cost-competitive marine facility for handling coal, iron ore, or grainexports for several reasons:

• The configuration and size of the site does not allow for a rail loop track to be constructed from and back to the UP main line immediately north of theterminal, so a unit train could not be received and unloaded without time-consuming and expensive railcar switching, which would likely cause frequent andextended blockage of several grade-crossings of Embarcadero Street.

• Because of the proximity of the terminal to the Jack London Square area and downtown Oakland, export shipments would have to all be unloaded directly intocovered structures to prevent cargo dust blowing into surrounding neighborhoods. Although grain shipments are typically unloaded into silos, coal and ironore shipments are usually marshalled for loading into ships in open-air stockpiles, so the requirement for covered storage would make a dry bulk facility at thissite even less cost-competitive.

• Political and community support for such a conversion project would likely be nonexistent.

▪ Tioga Group implicitly acknowledged the above-mentioned points in its Cargo Forecast for the BCDC, as well as the fact that there are no large-scaleexport terminals elsewhere in the Bay Area for these three main dry bulk commodities, and accordingly, assumes in that report that the Bay Area willcontinue to handle minimal volumes of these three commodities.

▪ Thus, to the extent that Howard Terminal has potential commercial utility in the future for handling dry bulk cargoes, that potential will have togenerated by the Bay Area terminal capacity requirements of shippers of secondary bulk commodities.

▪ Tioga Group also acknowledged this preceding point, and focused its forecasts of future Bay Area dry bulk movements on a concise set of commodities –specifically, export petroleum (pet) coke, export metal scrap, imported gypsum, imported bauxite, and imported construction aggregates.

Demand for/utility of Howard Terminal for dry bulk cargoesIntroduction

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Pet coke

▪ Mercator excluded export pet coke from consideration as a cargo for Howard Terminal, as there are several reasons why it is very unlikely that therewould be demand in the future from exporters of this commodity to use Howard Terminal as their marine facility:

• Pet coke is produced as a by-product of oil refining, and shipped from the marine terminals closest to the refineries. In the Bay Area, those refineries andterminals are located around Suisin Bay and Richmond, so the exporters would incur additional trucking costs to transport the cargoes to Oakland.

• The tonnages being exported are relatively small (at less than 600,000 tons per year) and unlikely to grow much (without refinery processing capacitiesincreasing substantially first), and so the incumbent ports handling the product (mainly Benicia and Richmond) should have adequate capacity during theforecast period.

• The relatively small tonnages of pet coke would make it financially challenging to earn a return on the capital investment required to convert Howard Terminalto be able to handle this product, especially since the facility would require a large covered storage shed

• Moreover, given the use of pet coke in certain overseas markets as a substitute for coal, obtaining construction permits for such a conversion project from theCity of Oakland would be extremely difficult.

Scrap metal

▪ Mercator excluded export scrap metal from consideration as a cargo for Howard Terminal because:

• There already is an export scrap metal marine terminal in the port, on private property.

Gypsum and bauxite

▪ Mercator excluded import gypsum and bauxite from consideration as cargos for Howard Terminal, for a few reasons:

• Both commodities move through three private terminals (two for gypsum, one for bauxite) owned by the companies importing the cargoes, and thesecompanies have on-dock processing facilities.

• All three terminals utilize open-air stockpiles, which would not likely be allowed at the Howard Terminal site.

• The tonnages are relatively small and growing slowly, and all three terminals appear to have adequate capacity and ability to expand throughput.

• It is improbable that any of the three companies would want to lease property from the Port of Oakland and invest tens of millions of dollars for a conversion ofHoward Terminal (inclusive of building covered storage) to handle 300,000 tons per year (or less) of either gypsum or bauxite, a small volume of product relativeto the required investment

▪ Thus, the balance of this section focuses on commenting upon Tioga Group’s assessment of the long-term demand/supply balance for Bay Areaterminal capacity to handle imported sand and gravel and local bay harvested sand (i.e. “aggregates”).

Demand for/utility of Howard Terminal for dry bulk cargoesAdditional overview

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Demand for/utility of Howard Terminal for dry bulk cargoesTioga Group’s forecast for aggregates

Source: 2019-2050 Bay Area Seaport Forecast, Tioga Group, June 17, 2019.

Tioga Group’s forecast for aggregates demand▪ According to the Tioga Group report, the Bay Area portsreceived approximately 3.7 million tons of importedsand/aggregates and locally harvested sand in 2018.

• The sand dredged from the Bay comprised roughly 1 millionof those tons.

▪ Tioga Group projected a growth rate of 4.7% in theModerate Case scenario and 6.4% in the high growthscenario in its report.

• These relatively strong growth rates reflect Tioga Group’sviews on the outlook for construction activity in the Bay Areaand northern California, and diminishing supplies of localaggregates.

▪ More detailed research would be required to develop amore conservative set of growth rates, but even if TiogaGroup’s high growth scenario is realized, it is Mercator’sview that there are superior alternatives (relative to usingHoward Terminal) to increase marine terminal capacity inthe Bay Area for these aggregate/sand commodities.

▪ The capacity of an aggregates terminal is a function of theship’s unloading speed, the conveyor’s transfer speed tothe stockpile, and how quickly the product can betransferred from the stockpile into trucks for transport todestination.

▪ In the next section, Mercator describes the characteristicsof the Bay Area’s existing aggregate terminals and ways inwhich we believe capacity could be increased in the regionthrough a variety of methods, including:

• increasing the capacity of existing aggregate terminals

• converting other terminals or developing new ones forhandling aggregates

• increasing the use of lightering (unloading cargoes directlyfrom a ship to a barge), with barges then unloadingaggregates at secondary facilities

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Bay Area marine terminals for construction aggregatesOverview

▪ There are presently three ports in the San FranciscoBay/Suisin Bay area with terminals dedicated tounloading construction aggregates from ocean-goingships:

• Richmond (A) – one private facility

• San Francisco (B) – one facility leased from the PortAuthority

• Redwood City (C) – one facility leased from the PortAuthority

▪ Note – There is also a separate facility at the Port of SanFrancisco, as well as one at the Port of Redwood City,used for discharging sand dredged from San FranciscoBay.

▪ Tioga Group did not estimate the throughput capacity ofany of the five terminals in these three ports, based ontheir respective configurations/layouts and/or cargohandling equipment.

▪ Instead, Tioga Group assumed a generic, average tonsper acre and separate tons per berth across all dry bulkcommodities, in order to derive the terminal capacity inthe Bay Area required, in total, to handle projectedtonnages for this commodity group.

A

C

B

Google Earth view of Bay Area terminals handling aggregates

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▪ Eagle Rock Aggregates operates a dedicated aggregatesterminal located on the Richmond Ship Channel, on privateproperty owned by Levin Terminals and leased from thatcompany on a long-term basis.

▪ The terminal receives aggregates imported from VancouverIsland by Polaris Materials and transported in self-unloadingships.

▪ A conveyor system takes the product from the ship’s on-boardunloader directly into a covered shed, from which otherconveyors deliver the product to two parallel, covered truckbays to the north of the shed.

▪ According to the Polaris website, the terminal is permitted bythe City to receive 1.5 million tons per year of aggregates.

▪ As the photographs indicates, there is no space available toexpand the shed horizontally.

▪ However, given that the dimensions of the CSL ships used byPolaris and the water depth of the channel allow approximately40,000 tons of cargo to be carried per voyage, and since thattonnage can be easily unloaded in one day, it would bephysically feasible for the terminal to take at least one ship perweek, which would enable 2.1 million tons per year ofthroughput, if allowed.

• This would be feasible in terms of delivery capacity, based onassuming each of the two truck loading bays processing 12trucks per hour, for 14 hours per day (two shifts), 5.5 days perweek for 50 weeks per year (with each truck carrying 25 tons).

▪ Using our calculations of cargo unloading speed and truckloading speed/capacity, Mercator believes this terminal couldconceivably increase its throughput capacity to handle at leastan additional 600,000 tons, if allowed to do so by the City.

Existing Bay Area marine terminals for construction aggregatesPort of Richmond – Eagle Rock Aggregates

Aerial views of Eagle Rock Aggregates terminal

North

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▪ The Port Authority here has leased two separate land parcelsin the Piers 90-96 area to Hanson Aggregates, one of which(at Pier 92) is used to discharge sand/gravel dredged from theBay, and the other of which (at Pier 94) is used to receive self-unloading ships bringing in imported aggregates.

▪ The Pier 94 facility has roughly 20 acres of product laydownand truck parking area behind the berth.

▪ The Pier 92 facility is situated on approximately 5 acres ofland.

▪ As the photo to the right indicates, there is also undevelopedand/or under-utilized land (of about 6 acres) in between thetwo Hanson operations that could potentially be developed toprovide additional capacity for import aggregates.

▪ In addition, there is a 23-acre parcel of land immediatelybehind Piers 92 and 94, which is presently being partially usedto store construction materials but which could potentially beintegrated into the Hanson Terminal to provide morecapacity.

▪ Water depth alongside Pier 94 is maintained at 42’ (12.8 m),so a self-unloading dry bulk ship (like the CSL vessels used byPolaris Materials to ship aggregates from Vancouver Island tothe Eagle Rock Aggregates terminal in Richmond) could arriveat this pier carrying up to 60,000 tons of product per voyage.

Bay Area marine terminals for construction aggregatesPort of San Francisco – Piers 90-96

Pier 94

Pier 92

Google Earth view of Port of San Francisco – Piers 90-96

Pier 96

Pier 90

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▪ Cemex USA operates a dedicated aggregates import terminalin the Port of Redwood City (in yellow), leased from that porton a long-term basis, along with property for receiving sanddredged from San Francisco Bay and an adjacent facility forimporting bulk cement.

▪ The imported aggregates are sourced from British Columbiaand other locations.

▪ A conveyor system takes the product from the ship’s on-board unloader directly to an open-pile area.

▪ The aggregates terminal comprises about 8.5 acres and ishandling approximately 1.5 million tons per year.

▪ Although there is limited land available for the expansion ofthis terminal, its capacity could be increased with theinstallation of faster vessel unloading equipment.

▪ Also, an additional conveyor system could be installed toenable the utilization of a portion of the land at which Cemexreceives and stores San Francisco Bay sand/gravel andthereby utilize that property more intensively.

Bay Area marine terminals for construction aggregatesPort of Redwood City - Cemex USA

Google Earth view of Port of Redwood City Cemex USA operation

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Potential new terminals in the Bay Area for aggregatesPort of Richmond - Levin-Richmond Terminal

▪ Further up the Richmond Ship Channel from the Eagle Rock Aggregates terminal is the Levin-Richmond Terminal, which is on freehold land, owned by a private family.

▪ This terminal has handled break-bulk and dry bulk cargoes for several decades, with exports ofpet coke (produced at the Phillips Refinery in nearby Rodeo) being a key commodity for thefacility during that period.

▪ Since 2013, the terminal has also handled export coal that originates at mines in Utah and istransported by train to Stockton for transfer and loading onto ocean-going ships.

▪ However, those ships are more draft-constrained at Stockton than at Richmond, so they stop atthe Levin-Richmond terminal to load additional tonnage, which is brought to Richmond fromStockton by train (the terminal is served by the Richmond Pacific Railroad, a short-linerailroad).

▪ The coal is dumped into an open-air stockpile from the railcars, after which conveyors load thecoal onto the ships.

▪ Because of public health concerns about toxic coal dust spewing into Richmond’sneighborhoods, various stakeholder groups (including the Richmond City Council) andenvironmental organizations have been seeking to get rid of this business (as well as the petcoke export operation) through legislation, or perhaps litigation. Given the state, regional,county, and city politics, these groups are likely to succeed within the next 5-7 years or sooner.

▪ The only way for the coal export business (which amounts to roughly 1 million tons per year) tocontinue would be if Levin-Richmond Terminal Corporation constructed covered sheds and ifthe Utah coal mining companies were to use coal hopper cars with lids or netting. But this isunlikely because:

• The investment cost for the covered shed(s) would be high, and the throughput levels(constrained by the terminal’s limited acreage and water depth) would make such aninvestment financially unattractive.

• The investment in specialized hopper cars would also be significant, and difficult to support,given the throughput limitations.

▪ Therefore, Mercator concludes that this terminal will need to be repurposed anyway (due tothe aforementioned environmental issues), and thus could be available to become an importaggregates terminal.

▪ Given the configuration of this terminal, it should be feasible to construct a covered shed ofsimilar dimensions to the nearby Eagle Rock Aggregates shed (along with a conveyor systemand truck loading system, and possibly a railcar loading system as well) – with a capacity similarto or greater than the Eagle Rock Aggregates terminal.

Google Earth view of Levin-Richmond Terminal

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Potential new terminals in the Bay Area for aggregatesPort of Richmond - Terminal 3

▪ The Port of Richmond has a wharf and adjacent acreage on the east side of the shipchannel that was originally a small container terminal in the 1970s andsubsequently was used for break-bulk and project cargoes.

▪ The aerial photo of this terminal to the right was taken a year ago, at a time when acustomer was moving small volumes of break-bulk logs through the facility, whichalso includes an 80,000 SF on-dock warehouse.

▪ However, this terminal is greatly under-utilized.

▪ If the Bay Area’s volume of imported aggregates increases at the rate projected byTioga Group, this terminal could potential be adapted and converted into a dry bulkfacility dedicated to that commodity, although its covered shed would need to belonger and narrower than the Eagle Rock Aggregates shed, or the potential shed onthe Levin-Richmond Terminal.

▪ Nonetheless, a facility capable of handling at least 2 millions tons per year would befeasible at this site.

▪ Furthermore, given the configuration of rail spur tracks in the vicinity of theterminal, it could be feasible for this terminal to have one or two spur tracksrunning parallel to the warehouse and adjacent roadway, in which to loadaggregates into hopper cars (for movement to the Sacramento/Reno areas, or toCentral Valley markets).

• The use of rail cars to supplement trucks hauling the product inland from the terminalwould likely enable throughput capacity to exceed 2 million tons per year.

Google Earth view of Port of Richmond Terminal 3

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Potential New Terminals in the Bay Area for AggregatesFormer Oakland Army Base – West Gateway Area

▪ In February 2016, the City of Oakland executed a 66-year lease with anentity called Oakland Bulk and Oversize Terminal (OBOT) to develop andmanage a dry bulk terminal within the West Gateway section of theOakland Army Base property that the City was granted by theDepartment of Defense.

▪ OBOT is majority-owned by California Commercial and InvestmentGroup (CCIG), a real estate developer, which subsequently sub-leasedthe property to a bulk terminal operating company, Terminal LogisticsSystems (TLS). TLS was then replaced by Insight Terminal Solutions (ITS),key principals of which are coal industry executives.

▪ The TLS/ITS design layout for the planned terminal is shown to the lowerright. The designed annual throughput capacity would be for 6-10million tons of bulk product, with export coal being the primarycommodity to be handled (through covered sheds/silos).

▪ The terminal would have water depth of 49.8’ (15.2 m) at mean lowwater, and thus could receive and load small Cape-size ships (with100,000-125,000 tons). The terminal would also have an adjacent railyard, where cuts of unit trains could be marshalled prior to beingunloaded.

▪ However, CCIG/OBOT and the City of Oakland have been battling eachother in court since the latter part of 2016, when the City Councilbanned OBOT from handling coal (after belatedly learning that coalwas/is to be the terminal’s primary commodity). CCIG has sued the Cityover the legality of the ban, and the entire project is now being litigated.

▪ Given the strength of environmental groups in California and the BayArea, Mercator expects that OBOT (or a successor tenant of the WestGateway) will not be allowed to handle export coal at that site.

▪ However, essentially the same design could be utilized to develop animport aggregates terminal at this site. With an ability to use trains toevacuate the product to rail yards dispersed across northern California,the facility could potentially handle over 8-9 million tons per year.

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Pre-Development Planning for Oakland Army Base Gateway Development Area

Conceptual rendering of OBOT

Potential new terminals in the Bay Area for import aggregates Port of San Francisco – Piers 94-96

▪ On an earlier page, Mercator discussedoptions for expanding the existingHanson Aggregates open-pile operationat Pier 94 to encompass an unused 5acarea in between and behind Piers 94 and92.

▪ However, considering that the adjacentPier 96 is under-utilized and has on-dockrail tracks, it would be operationallyfeasible to develop a new importaggregates terminal with one or two newship-to-pile conveyor systems, a largecovered shed, and a conveyor system toload railcars.

▪ From Mercator’s calculations usingGoogle Earth, we estimate that such afacility could be sizable – with coreacreage of about 58 acres (piers 94 andnorth part of 96) and up to more than 90acres if the Pier 94 and Pier 96 backlandsare incorporated

▪ The on-dock rail tracks running betweenthe under-used Pier 96 and the Recologylease area (blue line) couldaccommodate about 40 parked railcars.

▪ Building a second rail track would furnishquite a bit of maneuvering room.Moreover, there is a rail yard located justwest of the area where recycledconstruction materials are being stored(pink star).

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Google Earth view of Port of San Francisco – Piers 94-96

Pier 94

Pier 96

▪ Even without returning land from non-maritime activity to maritime activity (i.e. withoutdisplacing 15 acre Recology recycling operation on Pier 96 or the self-storage facilities behind Pier90), and without needing all of the available P94-96, this facility could handle between 8 and 9million tons of aggregates - at least as much, if not more than, OBOT - because it is a larger areaand more rectangular, and there is a bigger rail support yard.

▪ If non-maritime uses such as self-storage and recycling operations were relocated, further newcapacity for maritime cargo handling could be created at Pier 90-96.

Pier 94 Backlands

Pier 96 Backlands

Pier 92

unused

Alternative marine import operations for aggregates in Bay AreaLightering from ships to barges

▪ Transferring aggregates from ocean-going ships to shallow-draft bargesis a tested alternative means of transporting this commodity intoadditional marine facilities beyond just the terminals in the Bay Area atwhich dry bulk ships could dock.

▪ For example, Lind Marine Services operates a dry bulk barge andlighters inbound aggregates ships to that barge in the San Francisco Bayfor Cemex (photos of this operation are shown to the right)

▪ Should the import aggregates volume projections of Tioga Group berealized in the future, and if additional capacity was required beyondwhat could be provided at the existing terminals in Richmond andRedwood City, at new terminals in Richmond and Oakland (OBOT), andat a modernized, expanded terminal in San Francisco, then the use ofthe Lind Marine-type lightering operation could be expanded andthereby allow barges to bring smaller parcels of import aggregates toshallow-draft secondary marine facilities, such as at:

▪ Sacramento

▪ Stockton

▪ Antioch

▪ Rio Vista

▪ Vallejo

▪ Petaluma

▪ Alameda

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Examples of lightering

Observations on handling import aggregates for the Bay AreaSummary

▪ The volume of aggregates/sand imported into the Bay Area in 2018 through ship terminals in Richmond, San Francisco, and Redwood City was estimatedto be about 2.75 million tons, accounting for about 73% of total inbound aggregates (with the balance consisting of sand dredged from the Bay).

▪ Tioga Group projects – in its moderate growth scenario – the total inbound aggregate tonnage to increase from about 3.75 million tons in 2018 toaround 5.1 million tons by 2030, about 9 million tons by 2040, and about 14 million tons by 2050.

• In Tioga Group’s strong growth scenario, the projections for those same years would be about 7 million, 12 million, and 24 million tons, respectively.

▪ Mercator estimates that the current collective throughput capacity of the three existing ship terminals – Eagle Rock Aggregates at Richmond, HansonAggregates at San Francisco, and Cemex at Redwood City – is in the range of 4.5-5.0 million tons.

▪ Assuming that imports account for 80% of total inbound aggregate tonnage (i.e., that the share comprised of dredged sand declines from its currentlevel) on average, over the forecast period, the Bay Area could be expected to require about 5.6 million tons of capacity by 2030, about 9.6 million tonsby 2040, and about 20 million tons by 2050 – under the strong growth scenario.

▪ As has been discussed here, there are multiple feasible options to obtain sufficient incremental capacity above the current 4.5-5.0 million tons per year,as summarized below:

• Increase capacity of existing terminals with faster, larger conveyor systems, larger stockpiles, and faster truck loading equipment

• We estimate that collectively the three existing terminals could add at least 1.0-1.5 million tons of incremental capacity.

• Convert existing terminals or develop new terminals

• The Levin-Richmond terminal could be repurposed from coal exports to aggregates imports, creating roughly 1.5-2.0 million tons of added capacity.

• Port of Richmond’s Terminal 3 could be converted, creating another 1.5 – 2.0 million tons of new capacity.

• A new 2-berth terminal (OBOT) could be developed at the West Gateway portion of the former Oakland Army Base, adding 8-9 million tons ofannual capacity.

• A 2-berth terminal could be developed at Pier 94-96 in San Francisco, (amalgamating Pier 96 with the Hanson terminal at Pier 94), adding 6-8 milliontons of new capacity.

▪ So, In the event that Tioga Group’s strong growth materializes, the options identified above could be implemented to provide about 18-20 million tonsof additional capacity above the existing 4 -5 million ton capacity, which should be more than sufficient to handle the demand.

• Furthermore, the use of lightering in San Francisco Bay (to unload cargo from ships and into barges) could be increased, which would provide additionalcapacity and the ability to distribute import aggregates to several smaller marine facilities in the San Francisco Bay/Delta waterway complex.

For the reasons cited above, Mercator therefore concludes that Howard Terminal will NOT be needed for aggregates or other bulk materials.

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