Trans-Talk

Canadian Pacific Railway (CPR) has capitulated to William Ackman’s demands for firing CEO Fred Green and replacing 7 directors on the railway’s 16-member board.

CPR announced at 7:30 AM this morning, in advance of the company’s Calgary AGM (Annual General Meeting), that Green is gone, resigning his director’s seat. The other 6 old guard directors including “John Cleghorn, Tim Faithfull, Edmond Harris, Michael Phelps and Roger Phillips have advised the Company that they do not intend to stand for re-election. This decision was made after taking into account the views expressed by shareholders about the desire for Board change.”

Ackman and his desired directors will be running unopposed at the AGM and will presumably hire Hunter Harrison, former CEO of CN (Canadian National), to replace Fred Green. The CPR directors are:

• William Ackman,
• Gary Colter,
• Richard George,
• Paul Haggis,
• Paul Hilal,
• Krystyna Hoeg,
• Tony Ingram,
• Richard Kelly,
• Rebecca MacDonald,
• The Hon. John Manley,
• Anthony Melman,
• Linda Morgan,
• Madeleine Paquin,
• David Raisbeck,
• Hartley Richardson and
• Stephen Tobias.

(Source: CPR press release, “Canadian Pacific Announces Board and Management Changes”)

Released on March 16, 2012, the 2010 edition of Status of the Nation’s Highways, Bridges, and Transit: Conditions & Performance points to a sizeable gap between current spending and projected levels of investment needed to maintain American highway and transit systems. Conditions and Performance is a biennial report to Congress that provides information on the physical and operating characteristics of the highway, bridge and transit components of the nation’s surface transportation system.

The Department of Transportation’s (DOT) report projects that $101 billion, plus increases for inflation, would be needed annually over the next 20 years from all levels of government - local, state and federal - to keep the highway system in its current state. In 2008, all levels of government spent a combined total of $91.1 billion on highway capital improvements. The report also identifies potential improvements to the current state of highways and bridges that could cost an additional $170 billion a year.

The Obama Administration’s FY (fiscal year) 2013 budget request calls for $305 billion for federal contributions to highway programs over six years.

Transit Remains the Poor Sister

The Conditions and Performance report projects that between $20.8 billion and $24.5 billion will be needed annually over the next 20 years to maintain the nation’s transit systems and to accommodate expected transit ridership growth. In contrast, all levels of government combined spent only $16.1 billion on transit capital improvements in 2008. The Obama Administration budget request includes $108 billion over the six years for transit options, a 105 percent increase over the previous authorization levels.

Organization and Content of the Conditions and Performance Report

It consolidates conditions, performance, and financial data provided by States, local governments, and mass transit operators to provide a national-level summary. It draws primarily on 2008 data.

The main body of the report is organized into four major sections:

1. The six chapters in Part I, “Description of Current System,” contain the core retrospective analyses of the report.
   • Chapter 1 provides a broad overview of the functions served by the Nation’s highways and transit systems.
   • Chapter 2 describes recent trends in highway, bridge, and transit system characteristics.
   • Chapter 3 depicts the current physical conditions of highways, bridges, and transit systems.
   • Chapter 4 describes the current operational performance of highways and transit systems.
   • Chapter 5 discusses issues relating to the safety of highways and transit.
   • Chapter 6 discusses highway and transit revenue sources and expenditure patterns for all levels of government, as well as recent innovations in highway finance.
2. The four chapters in Part II, “Investment/Performance Analysis,” contain the core prospective analyses of the report, including 20-year future capital investment scenarios. The Introduction to Part II provides critical background information and caveats that should be considered while interpreting the findings presented in Chapters 7 through 10.
   • Chapter 7 projects the potential impacts of different levels of future highway, bridge, and transit capital investment on the future performance of various components of the system.
   • Chapter 8 describes selected capital investment scenarios in more detail and relates these scenarios to the current levels of capital investment for highways, bridges, and transit.
   • Chapter 9 provides supplemental analysis relating to the primary investment scenarios, comparing the future investment scenario findings to previous reports, relating past investment to the current conditions and operational performance of the system, discussing scenario implications, and exploring selected policy alternatives.
   • Chapter 10 discusses how some future highway and transit investment scenarios would be affected by changing the assumptions about travel growth and other key variables.
3. Part III, “Sustainable Transportation Systems,” includes a set of three new chapters exploring sustainability, climate change adaptation, and livability. Some of the topics discussed have been referenced in previous editions of this report, but this edition is the first to explore these issues in a concentrated fashion.
   • Chapter 11 examines issues pertaining to the long-term environmental sustainability of the transportation system and the challenges involved in meeting the needs of the present without compromising the ability of future generations to meet their own needs.
   • Chapter 12 explores climate change adaptation, identifies potential impacts of climate change on transportation, and discusses policies and measures intended to promote effective responses in adapting to these changes.
   • Chapter 13 discusses issues pertaining to livability and efforts to foster livable communities in which transportation, housing and commercial development investments have been coordinated so that everyone has access to adequate, affordable, and environmentally sustainable travel options.
4. The report also contains three technical appendices that describe the investment/performance methodologies used in the report for highways, for bridges, and for transit. A fourth appendix describes ongoing research activities and identifies potential areas for improvement in the data and analytical tools used to produce the analyses contained in this report.

An Executive Summary is included and also available separately. The 2010 Status of the Nation’s Highways, Bridges, and Transit:
Conditions & Performance report is provided in HTML or PDF format.

On March 7, 2012, the U.S. FMC (Federal Maritime Commission) began allowing the use of freight rate indices (indexes) for contracts between shippers and container carriers. Previously shipping contracts were based solely upon published tariffs, which will remain in use for probably a majority of the box trade.

The FMC’s final rule for freight index-based service contracts is meant to provide flexibility and certainty to ocean carriers and their customers. The new rule makes clear that service contracts can reference freight indices or other outside terms, so long as they are readily available to the contracting parties and the Commission.

The initiative has been largely driven by liner conferences which are suffering unprofitable rates due to excess capacity. During the FMC’s public comment period, the TSA (Transpacific Stabilization Agreement), Westbound Transpacific Stabilization Agreement (WTSA), World Shipping Counsel (WSC), carrier parties to the World Liner Data Agreement (WLDA), and TSC Container Freight (TSC) made favourable submissions.

The TSA Revenue Index is calculated monthly from the average revenue per FEU (Forty-foot Equivalent Units) of 12 of 15 member shipping companies, using a June 2008 base of 100. TSA says the index includes tariffs and service contracts representing more than 75% of eastbound cargo volume. It’s been published since Jan-2010 (although publicly available only since Aug-2011), and as of Jan-2012 sits at 85.4 for U.S. westcoast ports and 82.4 for eastcoast and Gulf ports. The TSA index excludes cargo discharged at Canadian or Mexican ports.

To protect the interests of smaller shippers, carriers and NVOCCs (Non-Vessel Owning Common Carriers) will be responsible for supplying historical index data upon request by the FMC. Although some data is publicly available, much of it is subject to expensive subscriber fees (e.g. Drewry’s monthly Container Freight Rate Insight costs £1395 per annual subscription).

Adoption of index-based rate contracts has been slow, mostly because of shipper resistance. Of the approximately 46,962 effective service contracts on file with the FMC between May 1, 2011 through February 9, 2012, only 62 have been identified as referencing indices — 0.13% of the total.

Carriers are not neglecting their traditional strategies of revenue enhancement. There have been several months of announcements for rate recovery or restoration, including three General Rate Increases (GRIs) by TSA carriers between Jan - May 2012 and further increases planned during the peak season of July - Oct. The TSA has also been encouraging members to hold firm on full recovery of ancillary cost-based charges for fuel, terminal handling fees, inland transport and so on.

Other Container Indices

• Drewry, with partner Cleartrade Exchange, maintains the World Container Index (WCI). Drewry also keeps sub-indices for the world’s major liner routes, which are available directly for a subscription fee and are published weekly in the Journal of Commerce.
• Shanghai Shipping Freight Exchange maintains an index for Asia-Europe routes and Asia-U.S. Westcoast, offering occasional reports on price trends for container shipping contracts. The most recent report of March 9, 2012 notes sharp price increases for Asia-Europe routes and a corresponding rise for forward contracts since the beginning of the year. During the same period, eastbound transpacific routes showed price increases for forward contracts, but spot market pricing began a continuing decline in February.
• China Container Shipping Index publishes the Shanghai Container Freight Index as well as a China Container Freight Index, and two bulk indices. English market reports are also available.
• Container Trades Statistics partners with World Liner Data and publishes a monthly aggregate index of container volumes and average prices. More granular data is available for a fee.
• Various Charter Indices
  • Braemar BOXi
  • Clarkson
  • Howe Robinson Index
  • Harpex
  • Maersk Broker Container Index

Liner Conferences

Liner firms carry shipping containers on a scheduled time and port rotation. Conferences are price fixing cartels that share capacity and/or profits on agreed routes from which potential competitors are vigorously excluded. The vagueness of international shipping law and history allow them to continue into the present, although member cheating, evolving competition law — especially in the EU –, and technological change have reduced the power of the cartels.

For detail on liner conference memberships, readers are referred to the FMC’s Agreements Page which lists companies and all the (U.S.) agreements that they’re party to.

There are numerous additional cartel agreements beyond the following short list.

• Transpacific Stabilization Agreement (TSA)
  • APL Ltd.
  • China Shipping Container Lines
  • CMA-CGM
  • COSCO Container Lines, Ltd.
  • Evergreen Line
  • Hanjin Shipping Co., Ltd.
  • Hapag-Lloyd AG
  • Hyundai Merchant Marine Co., Ltd.
  • Kawasaki Kisen Kaisha, Ltd. (K Line)
  • Maersk Line
  • Mediterranean Shipping Co.
  • Nippon Yusen Kaisha (N.Y.K. Line)
  • Orient Overseas Container Line, Ltd.
  • Yangming Marine Transport Corp.
  • Zim Integrated Shipping Services
• Westbound Transpacific Stabilization Agreement (WTSA)
  • American President Lines, Ltd./APL Co. Pte Ltd.;
  • COSCO Container Lines Company Limited;
  • Evergreen Line Joint Service Agreement;
  • Hanjin Shipping Co., Ltd.;
  • Hapag-Lloyd AG;
  • Hyundai Merchant Marine Co. Ltd.;
  • Kawasaki Kisen Kaisha, Ltd.;
  • Nippon Yusen Kaisha Line;
  • Orient Overseas Container Line Limited;
  • and Yangming Marine Transport Corp.
• Grand Alliance
  • A.P. Moller-Maersk A/S;
  • Hamburg-Sud;
  • Hapag-Lloyd
  • Hyundai Merchant Marine Co. Ltd.;
  • NYK;
  • Orient Overseas Container Line, Ltd.;
  • Zim.
• New World Alliance
  • APL,
  • Hyundai Merchant Marine and
  • Mitsui OSK Lines
• World Liner Data Agreement
  • A.P. Moller-Maersk A/S;
  • CMA CGM S.A.;
  • Hamburg-Sud;
  • Hapag-Lloyd AG;
  • United Arab Shipping Company S.A.G.

(Sources: FMC, press release and final rule (10 pp., 50KB pdf); TSA Revenue Index (Jan-2012))

The City of Vancouver today launched a one-year pilot project that allows taxis to travel, but not stop, pick up or drop off passengers, in six of the city’s seven bus lanes.

The streets with bus lanes included in the pilot are: Pender, Hastings, Burrard, Broadway, Georgia and Granville streets.

Granville St., which carries a significant portion of taxi traffic between downtown and YVR (the airport), already sees heavy use of the bus lanes by taxis. Despite the risk of fines taxis have been weaving in and out of the bus lanes as they try to shave a few minutes off their trip time (another favourite time-saver is use of the Angus St. bike route).

The project is meant to determine if the change will help taxis reduce travel times, particularly in congested areas, without causing a significant delay for transit operations. City Council received input from the Taxi Roundtable, TransLink, Coast Mountain Bus Company, and the Vancouver Police Department.

The January 9, 2012, Council report on taxis in bus lanes can be found at www.vancouver.ca.

What We Know To Date

At 15:30 Eastern Standard Time on February 26, VIA Rail passenger train 92, en route from Niagara Falls to Toronto, proceeding eastward on CN’s Oakville Subdivision, entered the crossover in Burlington and derailed the locomotive and 5 coaches. The locomotive struck a building after it derailed and was totally destroyed. Many passengers were injured, and tragically, the 3 crew members in the cab of the locomotive were fatally injured.

The TSB investigation team has now begun to examine the data from the locomotive event recorder (the “black box”). It can now be confirmed that the train entered the crossover from track 2 to track 3 at approximately 67 mph. The maximum authorized speed at that crossover is 15 mph.

(Source: TSB)

Although its investigation is still in the field stage (i.e. gathering information at the crash site and other external sites such as CN’s control room), the TSB (Transportation Safety Board) has reiterated a recommendation that voice (and video) recording equipment be installed in locomotives. It suggests that without such evidence, it may be unable to find out conclusively the cause of this accident.

The Government of Canada’s efforts to block rigorous go-it-alone ballast rules for ships operating in New York State waters has born fruit. New York’s proposed rules were also opposed by several American jurisdictions worried about the impact on international trade through the Port of New York and inland ports on the Great Lakes.

In a Feb. 22 press release, the New York State Department of Environmental Conservation (NYDEC) announced “that New York will pursue a uniform, national ballast water standard that will leave in place the EPA’s current standards in New York for the remainder of EPA’s current Vessel General Permit through December 2013.” NYDEC Commissioner Joe Martens also said that NYDEC would continue to push for tighter regulations than those proposed by the U.S. EPA (Environmental Protection Agency) for the next four-year term, December 2013 through December 2017. The EPA proposal is based on IMO (International Maritime Organization) recommendations from 2004, which have been generally endorsed by Canada.

In a Transport Canada press release yesterday, Parliamentary Secretary to the Minister of Transport, Infrastructure and Communities, Pierre Poilievre, welcomed the NYDEC announcement.

“Canada applauds New York State for withdrawing its unattainable ballast water requirements and agrees that uniform standards are the best way to protect the marine environment,” he said, adding, “there have been no new species attributed to ballast water reported in the Great Lakes since 2006.”

However, the EPA predicts that more invasive species are coming via ballast water, or are already in the Great Lakes and awaiting discovery.

Poilievre’s comment that, “Canada remains strongly committed to protecting the Great Lakes from invasive species and ensuring the vibrancy of this shared water resource, and looks forward to internationally compatible ballast water requirements that will foster economic growth while preserving our natural resources,” must be taken with a grain of salt given his government’s atrocious record and reputation for environmental protection.

Writing for Canadian Transportation and Logistics, Leo Ryan offers an overview of turmoil for container lines. Good news for shippers, at least on rates, but bad news for carriers.

Towards the end of an eventful 2011, global shipping lines were doing their utmost to adjust to spreading economic malaise, especially in eurozone countries reeling under a sovereign debt crisis and in a United States still buckling under a real estate meltdown. Amidst weak freight rates, overcapacity and mounting carrier losses, some industry analysts were predicting more consolidation in coming years.

The situation for bulkers is similar. (Source: CTL, Global shipping lines grapple with plunging rates, overcapacity and faltering recovery)

The 185,000 DWT Alaskan Navigator, an oil tanker with capacity of 1.3 million barrels that sails between Valdez, Alaska and American west coast ports, is undergoing repairs in Port Angeles, WA after a crack in its outer hull was discovered at sea. The inner hull of the double-hulled ship was not breached and no oil spilled.

There have been previous reports of manufacturing defects on the Alaskan Navigator and its three sister ships owned by BP Oil.

Opponents of Enbridge’s Gateway Pipeline terminal in Kitimat, cite the incident as an indicator of potential damage from a proposal to accommodate 220 ship calls a year in Douglas Channel. An estimated 25 per cent of ships would range to 320,000 dead weight tonnes, 50 per cent in the range of 120,000-200,000 tonnes and 25 per cent in the range of 80,000-120,000 tonnes. (Sources: http://www.vancouversun.com/supertanker+hull+crack+raises+concern+increased+traffic+coast/6087898/story.html#ixzz1lFpnAxjL; MarEx Newsletter, http://media.tmmarket.com:81/marex/media/newsletter/archives/old/readmore0ff7.html?issue_id=207&article_id=1969&l=%3C)

Port Metro Vancouver says it has no long-term plans to expand operations on Agricultural Land Reserve farmland — but Richmond Mayor Malcolm Brodie doesn’t believe the agency.

Read more: http://www.vancouversun.com/news/Richmond+mayor+wary+Port+Metro+Vancouver+farmland+plans/6087681/story.html#ixzz1lFdeEKoJ

The Port’s CEO Robin Silvester has added fuel to a public spat with proponents of British Columbia’s Agricultural Land Reserve (ALR) over the future of the 80-hectare Gilmore Farm. The issue came up when the Port bought the property south of No. 8 Road and Westminster Hwy. in 2009. The farm abuts an existing Port property of 240 hectares. Silvester has begun speculating on its removal from the ALR as he publicizes the Port 2050 plan for expansion, which favours the “Great Transition” as the best of four future scenarios used in the planning exercise.

Under Bill 14, the BC Ferry Commission (the “Commission” or the “Commissioner”) has been mandated by the Province of BC to conduct a review (the “Review”) of the Coastal Ferry Act (the “Act”) as it relates to the regulation of ferry operators. The objective of the Review is to recommend to the Minister of Transportation and Infrastructure changes to the Act which will better enable the Commissioner to balance the interests of ferry users with the financial sustainability of ferry operators.

The review’s report from Ferry Commissioner Gordon Macatee makes 31 recommendations, many of which would increase the Commissioner’s power to decree and implement fare and capital adjustments. He also advocates removal of user-pay provisions in the current Ferry Act and a return to the cross subsidization of minor routes which, along with Northern routes, don’t attract enough traffic to be self-supporting.

BC Minister of Transportation and Infrastructure Blair Lekstrom says he supports the recommendations and that new Premier Christy Clark’s Liberal government is generally amenable under its “family first” policies.

However, according to The Driftwood:

Members of the Ferry Advisory Councils are not as excited about the review as might be expected, however, according to Salt Spring’s FAC (Ferry Advisory Council) chair Harold Swierenga.

“I’m glad to see it, yes — we have absolutely no problem with the review being conducted — but the underlying problem as far as we can see is outside its terms of reference,” he said Tuesday.

“That’s our only beef — but it’s a big one.”

Swierenga said ferry fares have gone up about four times the rate of inflation in recent years, and as a result ridership is down.

The fix to fare increases won’t come by finding B.C. Ferries a way to pinch a few more pennies in its spending, he said, and in any case a review by the Comptroller General has already found the company is well managed.

The problem that isn’t being addressed by the review, he said, is the government’s subsidy or contribution amount, which has not been raised since the corporation was changed in 2003.

(Sources: http://www.bclocalnews.com/vancouver_island_south/saltspringislanddriftwood/news/122542288.html; Sechelt Coast Reporter, “Commissioner’s report calls for change“)

The report is a 104 pp., 879 KB download.