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The management of an international joint venture : the case of the long beach coal terminal Olsen, Laurence Roach 1983

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THE MANAGEMENT OF AN INTERNATIONAL JOINT VENTURE THE CASE OF THE LONG BEACH COAL TERMINAL By LAURENCE ROACH OLSEN M . S c , The U n i v e r s i t y o f B r i t i s h Columbia, 1983  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS  FOR THE DEGREE OF  MASTER OF SCIENCE  in BUSINESS ADMINISTRATION in The F a c u l t y o f Graduate S t u d i e s  We a c c e p t t h i s t h e s i s as conforming t o the required  standard  THE UNIVERSITY OF BRITISH COLUMBIA August 1983 © Laurence Roach O l s e n , 1983  In p r e s e n t i n g  t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of  requirements f o r an advanced degree a t the  the  University  o f B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make it  f r e e l y a v a i l a b l e f o r reference  and  study.  I  further  agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying o f t h i s t h e s i s f o r s c h o l a r l y purposes may  be granted by  department or by h i s or her  the head o f  representatives.  my  It is  understood t h a t copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain  s h a l l not be allowed without my  permission.  Department of  comnarf.fi  The U n i v e r s i t y of B r i t i s h 1956 Main Mall Vancouver, Canada V6T 1Y3 Date  DE-6  (3/81)  August  25,  1983  Columbia  written  AB  This  paper examines  S T R A C T  the o r g a n i z a t i o n a l  structure of a m u l t i - p a r t i c i p a n t  venture e s t a b l i s h e d t o develop a coal terminal analysis  focuses  on t h e e f f e c t  making and management the  decision-making  operational  problems  during  o f the o r g a n i z a t i o n  t h e development  framework  a t Long Beach P o r t .  many  of  upon  decision-  The e f f e c t i v e n e s s of the i n s t i t u t i o n a l  multi-dimensional  aspects  would o r i g i n a t e  New Mexico.  New  develop, and c o n s t r u c t  Such a t e r m i n a l  p r i m a r i l y i n the States  electric  and  of the  a modern c o a l export  would p r o v i d e a c o s t  efficient  t r a n s f e r o f steam (or t h e r m a l ) c o a l from r a i l t o seaborne s h i p p i n g modes. coal  The  highlighted.  The p r o j e c t was i n i t i a t e d t o p l a n , terminal  The  structure  process.  i n resolving  i s described.  t r a n s p o r t a t i o n problem a r e a l s o  a t Long Beach, C a l i f o r n i a .  joint  generating  plants  of Utah, Colorado,  The  Wyoming and  i n Japan, Taiwan and South K o r e a  would be t h e d e s t i n a t i o n f o r t h e c o a l .  A number o f f a c t o r s make t h i s to  investigate features  coal  terminal  of o r g a n i z a t i o n a l  making i n a multi-owner system.  project  structures  an e x c e l l e n t  opportunity  and consequent d e c i s i o n -  These a r e :  a)  Steam c o a l had a r e l a t i v e l y new and f a s t F a r E a s t e r n demand p r o j e c t i o n s .  b)  The p r o j e c t i n v o l v e d diverse interests.  c)  A major o r g a n i z a t i o n a l period.  d)  The proposed Long Beach t e r m i n a l i n s t i t u t i o n a l obstacles.  a joint  growing market  venture w i t h f i v e  partners  according t o  representing  s t r u c t u r e had t o be developed i n a s h o r t t i m e  (ii)  l o c a t i o n would  be s u b j e c t  t o many  The  e)  The c o a l t e r m i n a l r e p r e s e n t e d the l a s t " l i n k " i n the c o a l " c h a i n " o t h e r t r a n s p o r t components i n the l o g i s t i c s system were a l r e a d y place.  f)  There e x i s t e d a c r i t i c a l p l a n n i n g very c a p i t a l intensive project.  development  viability  are  competitive  the  terminal  Ironically,  organization  outlined.  A u s t r a l i a are  the  of  on  the  development  expected b a s i s advantages  U.S.  west  f o r the  and  coast  horizon  for  this  project's  disadvantages and  in  of  Canada  and  described.  the t r a n s p o r t a t i o n o f the  project.  the  relative  locations  The  which must be  They r e f l e c t  resolved  through  multi-owner o r g a n i z a t i o n individuals  environmental  c o a l i s the l e a s t c o n s t r a i n i n g a s p e c t  r e a l problems i n the  t r a n s p o r t a t i o n systems.  and  The  and  and  as in  are  a  r e l a t e d t o the  physical  a l a r g e number of i n s t i t u t i o n a l  problems  d e c i s i o n - m a k i n g framework c o m p l i c a t e d by  structure.  considered  permitting,  p r o j e c t are not  of  The in  project  r o l e s of v a r i o u s relation  finance,  to  owners,  the  major  technology,  and  a  contractors, problems  energy  of  market  risks.  The  l i t e r a t u r e on i n t e r n a t i o n a l j o i n t ventures, d i s t r i b u t i o n channels, and  theory of involved  of  channel i n the  similarities  structures  i s reviewed and  Long Beach p r o j e c t .  between  the  An  analysis  permitted a  is less  made  of  other  in  a  distribution  frameworks  are  channel  a number  and  the  venture.  possible  operating  cumbersome d e c i s i o n - m a k i n g p r o c e s s  d i v e r s e i n t e r e s t s of the  various  I t i s concluded that there  participants  members i n a m u l t i - p a r t i c i p a n t j o i n t  compared t o  the  partners.  (iii)  formats and  still  which allow  may for  have the  TABLE OF CONTENTS Page ABSTRACT  i  TABLE OF CONTENTS  iv  LIST OF TABLES  x  LIST OF FIGURES  xi  ACKNOWLEDGMENT  x i i CHAPTER ONE INTRODUCTION  A.  Purpose  1  B.  Background t o U.S. Steam C o a l Trade w i t h P a c i f i c Rim C o u n t r i e s  2  C.  Outline  7  End Notes  11  T a b l e s and F i g u r e s  12 CHAPTER TWO  PACIFIC RIM MARKET"FOR STEAMING COAL PART I - - EMERGENCE OF T H E TRADE A.  D e c r e a s i n g Dependence on O i l  15  B.  D i v e r s i t y o f Energy Forms and Sources  18  C.  1. N u c l e a r Energy  22  2. 3. 4. 5. 6.  24 25 25 26 26  N a t u r a l Gas H y d r o e l e c t r i c Power A d d i t i o n a l O i l and Gas Sources A d d i t i o n a l Renewable Energy Sources A d d i t i o n a l Energy Forms from C o a l  B a l a n c e o f Payment I s s u e s  27  PART I I - PRESENT MARKET A.  V o l a t i l e Market H i s t o r y  28  B.  Slowed Economic Growth o f P a c i f i c Rim C o u n t r i e s  29  C.  Energy C o n s e r v a t i o n  31 (iv)  PART I I I - SUPPLY AND DEMAND Page A.  Supply by Major Resource Owners 1. 2. 3. 4. 5.  B.  32  Australia South A f r i c a Canada China United States  34 34 35 36 37  Demand by Japan  38  1. Demand f o r E l e c t r i c Power 2. Supply o f E l e c t r i c Power 3. F u e l Consumption C.  38 39 40  Comparison o f P r i c e Components, P r i c i n g P h i l o s o p h i e s , and P r i c i n g o f t h e Major P a c i f i c Rim S u p p l i e s . 1. C o a l Cost Components 2. P r i c i n g P h i l o s o p h i e s o f t h e Major S u p p l i e r s 3. P r i c e s o f Steam C o a l i n t h e P a c i f i c Rim Market  41  41 44 48  D.  F o r e c a s t o f Changes i n Comparative P r i c e s  51  E.  Terminal  54  as a F u n c t i o n o f CIF P r i c e  End Notes  57  T a b l e s and F i g u r e s  60  CHAPTERTHREE POTENTIAL WEST COAST TERMINAL LOCATIONS PART I ' - POTENTIAL'TERMINAL SITES A.  Introduction  78  B.  P o t e n t i a l Development L o c a t i o n s  84  1. P o r t o f Vancouver, Washington  85  2. 3. 4. 5. 6. 7. 8.  86 87 87 88 89 89 90  P o r t o f Kalama, Washington P o r t l a n d , Oregon A s t o r i a , Oregon Coos Bay, Oregon Stockton, C a l i f o r n i a P o r t o f Los A n g e l e s Long Beach  (v)  Page C.  The Long Beach Example  92  End Notes  98  T a b l e s and F i g u r e s  100 CHAPTER FOUR  MANAGING"A'JOINT~VENTURE  & ISSUES IN ORGANIZATIONAL  DEVELOPMENT AND STRUCTURE INTRODUCTION  104 PART I - MULTI-ORGANIZATIONAL DECISION MAKING  A.  The P l a n n i n g / C o n c e p t u a l  B.  P a r t i c i p a n t s and Role  Phase  104 108  1. E q u i t y P a r t i c i p a n t s (a) (b) (c) (d) (e)  108  The P o r t o f Long Beach Upland I n d u s t r i e s Corporation C. I t o h and Company Crowley M a r i t i m e C o r p o r a t i o n M e t r o p o l i t a n Stevedore Company  2. C o n t r a c t o r P a r t i c i p a n t s (a) E n g i n e e r i n g (b) E n v i r o n m e n t a l P e r m i t t i n g (c) G e o t e c h n i c a l C o n s u l t a n t (d) F i n a n c i a l A d v i s o r / C o n s u l t a n t (e) O i l F i e l d Operator ( f ) Secondary E n g i n e e r i n g C o n t r a c t o r (g) Systems C o n s u l t a n t C.  108 112 114 116 118 121 121 126 129 131 132 132 134  Summary  135 PART I I ' - MANAGEMENT"STRUCTURE  A.  Long Beach I n t e r n a t i o n a l C o a l P r o j e c t  137  1. J o i n t Committee  137  2. 3. 4. 5. 6. 7. 8.  139 140 140 141 142 143 144  J o i n t C o - o r d i n a t o r s o f t h e E x e c u t i v e Committee E n g i n e e r i n g Sub-committee F i n a n c e Sub-committee M a r k e t i n g Sub-committee Environmental Sub-committee L e g a l Sub-committee Government A f f a i r s Sub-committee  (vi)  Page B.  PBT J o i n t Venture  145  C.  E f f e c t i v e n e s s o f Management S t r u c t u r e s  146  D.  Ownership Issues and D i v e r s i t y o f O b j e c t i v e s  153  E.  1. O i l W e l l R e l o c a t i o n 2. C a p i t a l Costs Versus O p e r a t i n g C o s t s 3. T e r m i n a l P r i c i n g Compared w i t h Other E x i s t i n g / P o t e n t i a l Terminals 4. D i v e r s e O b j e c t i v e s o f t h e P a r t i c i p a n t s R e g a r d i n g t h e T e r m i n a l Ownership and O p e r a t i o n 5. P a r t n e r s h i p Versus C o r p o r a t i o n 6. D e b t / E q u i t y R a t i o s 7. Return on Investment/Return on E q u i t y Requirements  156 157 159  8. Unanimous Versus M a j o r i t y Vote i n PBT  163  160 162 162 163  Conclusion  164  End Notes  165  T a b l e s and F i g u r e s  167 CHAPTER FIVE  MANAGING A JOINT VENTURE;  THE LEGAL AND INSTITUTIONAL ENVIRONMENT  A.  Introduction  B.  The U.S. P o l i c y and R e g u l a t o r y  C.  171 Framework  1. f o r C o a l P r o d u c t i o n 2. f o r C o a l Use  172 173  3. f o r C o a l T r a n s p o r t a t i o n  173  E x t e r n a l Development I s s u e s  176  1. Environment  B.  172  (a) (b) (c) (d) Financial  176  F e d e r a l Framework S t a t e Framework Major Environmental Issues f o r t h e Long Beach P r o j e c t Managing t h e P e r m i t t i n g Process Issues  1. P r o j e c t F i n a n c e 2. F i n a n c i a l S t r u c t u r e 3. F i n a n c i n g A l t e r n a t i v e s (a) D i r e c t P r o j e c t Loans (b) Yen Funding from Japan F i n a n c i a l Markets (c) O f f - B a l a n c e Sheet F i n a n c i n g (d) D e c i d i n g on t h e F i n a n c i n g Mix (vii)  178 180 181 188 192 192 196 198 199 201 204 208  Page C.  F o r e i g n Investment P a r t n e r  213  D.  L e g a l and R e s t r a i n t o f Trade I m p l i c a t i o n s  217  E.  Socio-Economic Aspects  219  F.  Technology and Energy Market R i s k s  221  G.  1. The Market f o r O i l  222  2. 3. 4. 5.  223 224 224 225  The N u c l e a r O p t i o n Coal S l u r r y Transport Shallow D r a f t C o l l i e r s C o a l D e r i v e d Sources  Conclusion  225  End Notes  227  T a b l e s and F i g u r e s  229  CHAPTER SIX PROJECT IMPLEMENTATION AND CONTRACTING A.  Introduction  238  B.  Participants  238  C.  Implementation  239  D.  1. C o r p o r a t i o n Versus P a r t n e r s h i p  240  2. 3. 4. 5. 6.  240 242 244 249 250  Engineering Contracts M a r k e t i n g Programme F i n a n c i n g Issues O r g a n i z a t i o n a l Start-Up Commencement o f Union N e g o t i a t i o n s  Contracting  250  1. The T e r m i n a l C o n t r a c t 2. The C o n t r a c t as a S o l u t i o n t o U n r e s o l v e d I n t e r n a l / E x t e r n a l Problem D u r i n g t h e Development Phase 3. The Framework f o r N e g o t i a t i o n s  251 253 256  E.  Supply/Demand V a r i a b i l i t y  260  F.  Conclusion  264  (viii)  CHAPTER SEVEN CONCLUSION Page A.  Introduction  265  B.  The Market  266  C.  The U.S. Source  267  D.  M u l t i - P a r t i c i p a n t J o i n t Ventures  268  E.  O r g a n i z a t i o n a l Issues  268  F.  I n s t i t u t i o n a l Problems  270  G.  B e h a v i o r a l A s p e c t s o f J o i n t Venture Management  271  H.  The P r o j e c t F u t u r e  273  BIBLIOGRAPHY  275  (ix)  LIST OF TABLES  TABLE  Page  1.1  Pacific  Rim Steam C o a l Demand  13  1.2  D e l i v e r e d C o a l P r i c e s t o Japan  14  2.1  P r o j e c t e d G e n e r a t i n g C a p a c i t y by F u e l Source  61  2.2a  Volume and Composition  o f Japan TPE  62  2.2b  Volume and Composition  o f Japan TPE  63  2.3  Volume and Composition  o f Taiwan TPE  64  2.4  Volume and Composition  o f Korean TPE  65  2.5  Sensitivity  2.6  E l e c t r i c i t y G e n e r a t i o n Cost E s t i m a t e s  67  2.7  E l e c t r i c i t y S e c t o r C o a l Imports  68  2.8  C o a l Content  69  2.9  World C o a l Reserves  70  2.10  Steam C o a l Market Shares  71  2.11  Western S t a t e s C o a l Reserves  72  2.13  Thermal C o a l Demand Comparisons  74  2.14  Steam C o a l P r i c e s i n Japan (1981)  75  2.15  Ranges o f C o a l Cost Components  76  2.16  Comparison o f R a i l  77  5.5  E f f e c t i v e I n t e r e s t Costs  o f U.S. C o a l E x p o r t s  66  and Ocean S h i p p i n g D i s t a n c e s  U.S. D o l l a r / Y e n  (x)  234  LIST OF FIGURES  FIGURE  Page  2.12  M.S.  Coal F i e l d s  73  3.1  P o t e n t i a l West Coast T e r m i n a l S i t e s  101  3.2a  U.S.  102  3.2b  Puget Sound P o r t L o c a t i o n s  103  4.1  LBICP O r g a n i z a t i o n S t r u c t u r e  168  4.2  PBT O r g a n i z a t i o n S t r u c t u r e  169  4.3  LBICP Development  170  5.1  T a b l e o f Contents f o r EIR/EIS Study  230  5.2  E x p o r t C r e d i t F i n a n c i n g Format  231  5.3  Overseas Investment C r e d i t F i n a n c i n g Format  232  5.4  Yen S y n d i c a t e d Loan F i n a n c i n g Format  233  5.6  Safe Harbor Lease Format  235  5.7  Leveraged Lease Format  236  5.8  P a r e n t Company Guarantee Format  237  West Coast R a i l Routes  Time Schedule  (xi)  ACKNOWLEDGMENT  I would  like  Heaver,  Dr. B i l l  preparation appreciated.  t o take  t h i s opportunity  Waters,  of this  and Dr. Dean Uyeno f o r t h e i r  thesis.  I would  t o thank my T h e s i s a d v i s o r s , Dr. T r e v o r  also  Their like  patience, t o thank  m a n u s c r i p t w i t h i t s many changes.  (xii)  assistance during the  guidance, and support Louise  Gauthier  a r e much  f o r typing the  CHAPTER I  INTRODUCTION  A.  PURPOSE  The  purpose o f t h i s t h e s i s i s t o examine t h e o r g a n i z a t i o n a l s t r u c t u r e o f a  multi-participant Long  Beach,  j o i n t v e n t u r e e s t a b l i s h e d t o develop a c o a l t e r m i n a l a t  California.  organization  structure  development p r o c e s s . in  resolving  described. are  also  rail  upon  analysis  decision  of  highlighted. storing  i t aboard  focuses  making  on  the e f f e c t  and management  of the  during  the  The e f f e c t i v e n e s s o f t h e d e c i s i o n making framework the  institutional  The m u l t i - d i m e n s i o n a l  cars,  loading  many  The  and  aspects  ocean  i n open  involves  piles,  going v e s s e l s .  problems i s  o f the t r a n s p o r t a t i o n  The " t r a n s p o r t a t i o n "  the c o a l  operational  unloading  reclaiming  The t o t a l  problem  coal  the c o a l ,  transport  from and  distance at  the t e r m i n a l w i l l be l e s s than one m i l e o f conveyors.  The  paper demonstrates t h a t  the  ship  is  constraining terminal  development  boundaries  politic.  technically,  o f t h e c o a l from t h e t r a i n s t o operationally,  In r e s o l v i n g the t r a n s p o r t a t i o n and  boundaries  institutional, bodies  least  problem.  institutional These  the  the t r a n s p o r t  represent  relate  can p r o c e e d ) ,  t h e major  t o the i n t e r f a c e  financial, After  construction  legal,  social,  specifying  between  (so t h a t  organizational to  various  corporate,  financially  problem  barriers  the o r g a n i z a t i o n a l  (1)  or  completion.  governmental,  private, and  and  and  other  institutional  boundaries, the t h e s i s i d e n t i f i e s decision  making  process  t h e e f f e c t s o f t h e s e b o u n d a r i e s on t h e  during  implementation o f t h e p r o j e c t .  the  planning,  number o f p a r t i c i p a n t s (5) i n v o l v e d  some  interesting  organizational  d e c i s i o n making framework w i l l  process.  i n t h e Long Beach p r o j e c t  problems.  be d i s c u s s e d  The  present  multi-organizational  and r e l a t e d t o some examples  o f i n t e r n a t i o n a l j o i n t v e n t u r e management and d i s t r i b u t i o n channel  B.  and  The o r g a n i z a t i o n a l s t r u c t u r e i s d i s c u s s e d  as i t r e l a t e s t o t h e framework f o r t h e d e c i s i o n making  The  evaluation,  theory.  BACKGROUND TO U.S. STEAM COAL TRADE WITH PACIFIC RIM COUNTRIES  Coal  presently  Indications  s u p p l i e s more than 25% o f t h e world's energy r e q u i r e m e n t s .  are that  this  resource  will  need  to provide  between 50% and  60%  o f t h e energy r e q u i r e d by t h e w o r l d i n t h e next 20 y e a r s i f t h e growth  of  the  world  incremental  economy  energy  i s to  needs  coal  be  sustained. ^  will  By  accommodating  " a c t b o t h as a b r i d g e  systems o f t h e f u t u r e and as a f o u n d a t i o n  f o r the continued  these  t o t h e energy part that coal  w i l l p l a y i n t h e next century".2  In  the United  resource. prospect allies of  In  States,  coal  i s emerging  as a s t r a t e g i c n a t i o n a l  particular,  t h e Western  States  o f a major  steam  coal  trade  are preparing  development  with  energy  f o r the  the P a c i f i c  Rim  i n Japan, Taiwan and South Korea. I n t e r e s t i n t h e e x p o r t p o t e n t i a l  steam  forecasts  coal which  t o the P a c i f i c indicate  an  Rim has been  increased  (2)  general  stimulated level  by  a number o f  o f demand  plus  an  i n c r e a s e d U.S.  market share i n t h i s t r a d e .  See T a b l e 1.1  for Pacific  Rim  demand f o r e c a s t .  The  steam c o a l t r a d e from the U.S.  represents trade from  a  new  market.  a logistics the  To  system  originating  facilitate  logistics  part of to  60%  of  system  of  this  export coal  and  As w i t h most low v a l u e d b u l k  related  transportation  commodities,  c o s t s form  an  important  t o compete f o r a market s h a r e . In the  case  west c o a s t c o a l , t h e t r a n s p o r t a t i o n c o s t s r e p r e s e n t from  40%  the  the  transportation the  development  mine i n the Western U n i t e d S t a t e s t o the i n v e n t o r y  o f the p r o d u c t ' s a b i l i t y  t h e U.S.  the  i s r e q u i r e d which i s c a p a b l e o f moving the  l o c a t i o n o f the u l t i m a t e u s e r . the  West Coast t o the P a c i f i c Rim c o u n t r i e s  delivered system  competitiveness  price  resulting of  of  the  product.  Improvements  c o s t s can  significantly  i n lower  particular  sources  of  coal.  See  table  in  affect 1.2  for  r e c e n t CIF p r i c e s compared t o n e t mine c o s t .  It  i s important  to  distinguish  Thermal or steam c o a l for  electricity  and  bituminous  varities  with  steel  of  13,000 BTU's per pound.  The  a  exclusively  consisting  of  and  heating  range  metallurgical  coal.  as a b o i l e r - f i r i n g  It consists  o f both  between  i s d e r i v e d from h i g h v o l a t i l e bituminous  fuel  subbituminous  7,500  and  13,000  United  States  producing  c o a l w i t h an  excess  T h i s t h e s i s c o n c e n t r a t e s on thermal c o a l as a  e x p o r t market segment t o the P a c i f i c  Western  thermal  M e t a l l u r g i c a l c o a l i s used p r i m a r i l y f o r the p r o d u c t i o n  of  new  almost  g e n e r a t i o n purposes.  BTU's per pound.^ and  i s used  between  coal  presently mines,  (3)  Rim.  has  several  railroads,  logistical  port f a c i l i t i e s ,  systems trading  mechanisms, and p u r c h a s e r s . trade  t o a maximum  level  steam c o a l p e r y e a r . million  metric  been  a matter  of continuing  market  development  participation.  (1)  S t a t e s over  and p o s s i b l e  the world  steam  million  i t i s necessary  metric  export tons o f  concern  f o r both  the past impacts  coal  energy  export  needs trade,  that  United  t h e p u b l i c and p r i v a t e  several years. on t h e U n i t e d  during and  a large  five  The need f o r such a f a c i l i t y  and S t a t e Governments have p a r t i c i p a t e d  examine  emerging  level  c o a l p o r t be c o n s t r u c t e d .  i n the U n i t e d  which  five  of handling  F o r t h e t r a d e i n steam c o a l t o grow beyond t h i s  sector  Federal  o f approximately  t o n p e r year  S t a t e s West Coast has  These systems a r e capable  States'  this  economy,  i n s e v e r a l major  t h e next  the  To a s s e s s  studies  twenty y e a r s , t h e  possibilities  f o r U.S.  The most n o t a b l e o f these r e p o r t s a r e :  The MIT World C o a l Study "(WOCOL) — i n v o l v e d a l a r g e number o r g a n i z a t i o n s from 16 major c o a l u s i n g and p r o d u c i n g c o u n t r i e s . These groups spent one and o n e - h a l f y e a r s a s s e s s i n g t h e use o f c o a l as an energy source d u r i n g t h e next two d e c a d e s ; 4  (2) The Inter-Agency C o a l ' Export' Task' F o r c e — e s t a b l i s h e d by P r e s i d e n t C a r t e r and headed by t h e Department o f Energy f o r t h e purpose o f i d e n t i f y i n g courses o f a c t i o n which c o u l d be f o l l o w e d by v a r i o u s Government and p r i v a t e o r g a n i z a t i o n s as a means o f i n c r e a s i n g U.S. c o a l e x p o r t s ; 5  (3)  The" Westpo study — p r e p a r e d on b e h a l f o f t h e Western C o a l E x p o r t Task F o r c e under t h e a u s p i c e s o f t h e Western Governors Policy Office. T h i s study i n c l u d e d p a r t i c i p a t i o n by u s e r s , producers, t r a n s p o r t i n d u s t r y , and S t a t e Governments i n an attempt t o p r o v i d e a comprehensive assessment o f demand i n P a c i f i c B a s i n C o u n t r i e s and expand t h e l o n g term l a r g e volume c o a l t r a d e between t h e U n i t e d S t a t e s and t h e P a c i f i c Rim users.6  (4)  F o l l o w i n g the p u b l i c a t i o n o f t h e s e r e p o r t s , t h e r e has been a p r o l i f e r a t i o n o f a r t i c l e s and  interviews  expansion.  Concurrent  i n support with  of the West Coast steam c o a l  these  major  studies,  preliminary  i n v e s t i g a t i o n s were a l s o b e i n g made by  r a i l r o a d s , c o a l producers,  Rim  number  trading  companies,  and  a  large  of  public  export  Pacific  ports.  These  investigations involved technical, contractual, permitting, f i n a n c i a l , other  issues  coal  export  that  the  which would terminal  major  producers,  and  are  the  constraint  f i v e m i l l i o n metric The  on  need  be  resolved p r i o r  West Coast. against  tons per  year  r a i l r o a d s , and  extremely  to  The  i s the  to c o n s t r u c t i o n of  general  expanding  the  c o n c l u s i o n has  trade  to  a  level  l a c k o f a modern p o r t  the  development o f  a  been above  facility.  s h i p owners p r e s e n t l y have excess  i n t e r e s t e d i n promoting  and  capacity  a port  to  f a c i l i t a t e the expansion o f the t r a d e t o the f o r e c a s t l e v e l s .  This  s i t u a t i o n presents  an  i n t e r e s t i n g opportunity  development o f the p o r t component. far  exceeding  i t s importance  The  i n the  t e r m i n a l has  logistics  to  investigate  become a f o c a l  system  the  point  as measured by  the  u n i t p r i c e o f t h i s f u n c t i o n compared t o e i t h e r the d e l i v e r e d c o a l p r i c e o r the p r i c e o f the o t h e r  Any  proposed  fifteen intensive involved. terminal  and  port  facility  thirty  million  project. Their project  components i n the  Of  be  tons  to  per  necessity  diverse must  designed  system.  handle year  there  objectives  be  regarding  o r g a n i z a t i o n a l d e c i s i o n making environment.  throughput  represents  will  reconciled within  (5)  a  the  a  number  of  between  very of  capital  developers  participation constraints  of  in a  the  multi-  In s p i t e o f t h e o p t i m i s t i c f o r e c a s t s , u n c e r t a i n t i e s remain about t h e r o l e of  United  States  influences  western  a temporary  o i l glut  The  anticipated  bonanza  Instead  trade  market  over  the p a s t  price that  steam  Presently  has n o t m a t e r i a l i z e d .  there  i n a volatile  i s an  require  precise  until  statement  of  supporting  and programmes i n b o t h t h e U.S. and P a c i f i c  Although  o f U.S.  a more  indeterminant  over-supply  term  will  remain  trade.  o f t h e p o t e n t i a l market evidenced by a v a i l a b l e l o n g  This  will  growth,  development o f t h i s coal  The  is a  t h e main  steam  between U.S.  issue  appears  and d i v e r s i t y o f s u p p l y ,  the p r i n c i p a l P a c i f i c  narrows  coast  years.  trade  Markets.  there  competitiveness  quantities  Rim  on demand, d e c l i n i n g economic  to discourage  i n west  three  The f u t u r e  government p o l i c i e s countries.  tend  i n the P a c i f i c  l e v e l s and p r i c e s have f l u c t u a t e d c o n s i d e r a b l y  clear perception contracts.  coal  of coal p r i c e increases  and  situation.  steam  Rim  coal  users  until  and A u s t r a l i a n  will  t o be a t r a d e - o f f  between  i t i s generally  believed  not begin  t o import  the range o f CIF p r i c e supplies  Rim u s e r  (presently  large  differences  $10.00 p e r Mtce  d i f f e r e n c e i n CIF p r i c e ) . ^  The  c a p a c i t y o f t h e p r o d u c e r s , r a i l r o a d s , and t h e ocean s h i p p i n g s e c t o r i s  p r e s e n t l y adequate t o handle t h e s h o r t term f o r e c a s t t r a d e l e v e l s o f steam coal. or  The l a s t  "chain"  i s the  c u r r e n t l y under facility  r e m a i n i n g l i n k i n an expanded west c o a s t port  terminal.  consideration  b u t , as  indicated  There  are a  f o r the - c o n s t r u c t i o n earlier,  there  a r e no  logistics  number  of  system  proposals  o f a l a r g e west long  a v a i l a b l e t o support t h e development o f t h i s l a s t c a p i t a l  term  coast  contracts  intensive  link.  A number o f t o p i c s r e l a t e d t o t h e development p r o c e s s o f t h e Long Beach, C a l i f o r n i a terminal  forms t h e f o u n d a t i o n  (6)  of t h i s thesis.  C.  OUTLINE  The  second  United Rim  chapter  States/Pacific  interest  countries.  trade.  energy  t o the developing The reasons  on A u s t r a l i a .  i n this  section  Balance  as they  f o r the P a c i f i c  fossil  fuels  from OPEC  o f demand f o r thermal coal w i l l  Rim o b j e c t i v e o f d i v e r s i f y i n g t h e i r  reliance  Western  P r i m a r i l y these c o u n t r i e s  dependence on imported  demand f o r Western U.S. t h e r m a l  by t h e P a c i f i c  discussed  Rim steam c o a l  This i n c r e a s e s the general l e v e l  specific  reducing  t h e background  i n U.S. steam c o a l a r e d i s c u s s e d .  seek t o reduce t h e i r  The  examines  a l s o be i n c r e a s e d  supply sources  o f payments i s s u e s  support expansion  coal.  through  are b r i e f l y  o f t h e U.S.  export  trade.  An examination o f t h i s d e v e l o p i n g e x p o r t t r a d e would be incomplete without a d i s c u s s i o n o f t h e p r e s e n t c o a l demand i n t h e P a c i f i c Rim c o u n t r i e s . present  falling  countries.  demand  i s part  o f t h e slowed  It i s hardly indicative  economic  growth  o f a h e a l t h y , l o n g range  The  i n these  stable trade  p a t t e r n n e c e s s a r y t o support major c a p i t a l p r o j e c t s i n the U n i t e d S t a t e s .  The  chapter  Pacific  concludes with  Rim demand.  an overview  A comparison  o f t h e p r o j e c t e d U.S. s u p p l y and  o f p r i c i n g between t h e s u p p l y c o u n t r i e s  i s made i n c l u d i n g f o r e c a s t s o f p r i c e t r e n d s over t h e next s e v e r a l  decades.  The t e r m i n a l p r i c e i n r e l a t i o n t o t h e d e l i v e r e d p r i c e o f t h e steam c o a l i s also discussed.  Chapter U.S.  3 presents a b r i e f  west  coast  coal  description  export  o f the p o t e n t i a l  facility.  (7)  The  present  locations  for a  facilities  in  California  are described.  new  sites  are o u t l i n e d  for  choosing  Long  The planned  including  Beach  as  development programs  the d e v e l o p i n g  the example  companies.  for this  i n c l u d i n g a d e s c r i p t i o n o f the p a r t i c i p a t i n g  for potential  thesis  are  The  reasons  enumerated,  developers.  The f o u r t h c h a p t e r i n t r o d u c e s the o r g a n i z a t i o n a l s t r u c t u r e f o r the p r o j e c t joint  venture.  presented  according  developmental is  analyzed  project.  The  project to  phases.  developers  different  major  responsbilities  sub-contractors  i n the  conceptual  The r o l e o f each o f the j o i n t v e n t u r e  a c c o r d i n g t o what they  This  and  relates  primarily  and  participants  can be expected  t o c o n t r i b u t e t o the  to  financial/operational  (a)  their  s t r e n g t h s and (b) t h e i r mainstream complementary b u s i n e s s  The o b j e c t i v e s o f t h e p r o j e c t  are  group a r e d e s c r i b e d .  lines.  The s t r u c t u r e o f the  o r g a n i z a t i o n s t h e y form t o oversee the c o n c e p t u a l / p l a n n i n g and development phases o f t h e p r o j e c t a r e then examined. is  compared  literature. planning  to The  other  international  functioning  conceptual  phase  is  of  The committee management joint  the  examined  venture  committee and  examples  management  several  concept in  the  during  the  alternatives  are  discussed.  The c h a p t e r c o n c l u d e s w i t h a s e c t i o n on ownership i s s u e s between the j o i n t venture between  partners.  Major  problems  regarding  the p a r t n e r s a r e d i s c u s s e d i n c l u d i n g  problems.  (8)  diversity  resolutions  of  objectives  t o a number o f  The  fifth  management  chapter relating  institutional policies  continues  with  the  t o the e x t e r n a l  environment.  discussion  issues  A brief  involved  external  This  i s followed  development  issues.  issues  f a c i n g the developers,  these  in  detail  by  f o r the  an  in-depth  Although i t was  purpose  solutions.  problems  i n these  venture  i n the l e g a l  of  the  areas  The  external  on a few o f environmental  i n the greatest d e t a i l .  are presented  The e x t e r n a l i s s u e s r e g a r d i n g  many  to concentrate thesis.  U.S.  o f a number o f  are a great  decided  and  steam c o a l t r a d e i s  discussion  there  p e r m i t t i n g and f i n a n c i a l i s s u e s a r e d i s c u s s e d institutional  joint  i n t r o d u c t i o n t o the p r i n c i p a l  a f f e c t i n g t h e development o f t h e west c o a s t  presented.  of  along  with  The  proposed  a f o r e i g n j o i n t venture  partner,  l e g a l , r e s t r a i n t o f t r a d e , socio-economic t e r m i n a l a s p e c t s , and e f f e c t s o f new t e c h n o l o g y o r a l t e r n a t i v e energy forms a r e a l s o d i s c u s s e d  The  sixth  chapter  addresses  the  key  issues  of  in detail.  implementation  and  c o n t r a c t i n g once a d e c i s i o n t o p r o c e e d w i t h t h e p r o j e c t has been r e a c h e d . After  the p a r t i c i p a n t changes  major  implementation  activity  will  problems  initially  be  company, t h e commencement the  during  this  phase have been  are discussed.  t h e s e l e c t i o n o f an  The  o u t l i n e d , the  principal  engineering  areas  of  management  o f a m a r k e t i n g program, and the c o m p l e t i o n o f  f i n a n c i n g package. The o r g a n i z a t i o n a l s t a r t up and u n i o n  negotiations  are a l s o a d d r e s s e d .  In t h e c o n t r a c t i n g s e c t i o n , a d e t a i l e d examination i s made o f t h e t e r m i n a l throughput operational  contract. and  legal  t e r m i n a l performance.  Special terms  attention of  this  i s devoted  document  as  t o t h e commercial, they  relate  t o the  The c o n t r a c t can be a method o f r e s o l v i n g problems  (9)  which form a r e s i d u a l p a r t o f t h e development p r o c e s s . contract coal  i s discussed  sales  terminal  terms.  operator  w i t h examples. How  these  A d e s c r i p t i o n i s given  terms  are presented  This aspect  affect  in relation  o f the  of the basic  the n e g o t i a t i o n s  with the  t o the acceptance o f r i s k by  the n e g o t i a t i n g p a r t i e s .  The  c h a p t e r c o n c l u d e s w i t h a s e c t i o n which examines the p o s s i b i l i t i e s o f  variations  o f supply  and demand over  r i s k s and r e s p o n s i b i l i t i e s  a long  s e v e n t h and c o n c l u d i n g  the  organizational  organizational complicating  A  structure  the  on  the  management  i s presented.  can a s s i s t  This  do t o i n c r e a s e  signature.  decision  making  structure  This  includes  i n finalizing  discussion  The  also  project  and i t s  comments  regarding  how t h e  an e f f i c i e n t  includes  western  the fragmentation  development i n the near term.  construction  coal  logistics  o f the  present  o f U.S. t r a d i n g companies can  t h e communication and e f f i c i e n c y w i t h i n t h i s  are h i g h l i g h t e d concerning final  processes.  f o r the  In c l o s i n g , a number o f p r o j e c t i o n s a r e made r e g a r d i n g terminal  i n l i g h t of  c h a p t e r r e t u r n s t o t h e concept o f t h e e f f e c t o f  U.S. system and what t h e p o s s i b l e f o r m a t i o n  the  The  and i n s t i t u t i o n a l boundaries w i l l be g e n e r a l l y reviewed as  of  effectiveness  system.  period.  i s s u e s t o t h e t r a n s p o r t a t i o n problem.  synthesis  developers  contract  f o r these v a r i a t i o n s a r e d i s c u s s e d  the r i s k s a n t i c i p a t e d a t t h e time o f c o n t r a c t  The  term  system.  the p r o g r e s s i o n o f  A number o f c o n c e p t u a l  issues  what support any t e r m i n a l w i l l r e q u i r e p r i o r t o  decisions.  (10)  END ""NOTES  o f the Mass.:  1. World C o a l Study, Volume 1, C o a l -- B r i d g e t o t h e " F u t u r e , Report World C o a l Study, C a r r o l l L. W i l s o n , P r o j e c t D i r e c t o r (Cambridge, B a l l i n g e r P u b l i s h i n g Co., 1980) p. x v i . 2.  I b i d . , p.  xvii.  3. B.T.U. - B r i t i s h Thermal U n i t , an energy u n i t d e f i n e d as the amount o f heat r q u i r e d t o r a i s e the temperature o f one pound of water from 62 degrees F a h r e n h e i t t o 63 degrees F a h r e n h e i t .  o f the Mass.:  4. World C o a l Study, Volume 1, C o a l ' - - " B r i d g e t o the F u t u r e , Report World C o a l Study, C a r r o l l L. W i l s o n , P r o j e c t D i r e c t o r (Cambridge, B a l l i n g e r P u b l i s h i n g Co., 1980) p. 125.  5. U.S. Department o f Energy, Interagency C o a l E x p o r t Task F o r c e , I n t e r i m Report o f "the I n t e r a g e n c y C o a l E x p o r t Task "Force, D r a f t f o r P u b l i c Comment, January, 1981 p. 262. 6. Western Governors' P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Western U".S." Steam CoaT Exports' "to "the " P a c i f i c B a s i n , (New York, McGraw-Hill, 1982) p. 74. 7. MTCE — M e t r i c t o n o f c o a l e q u i v a l e n t i s d e f i n e d as m e t r i c t o n o f c o a l w i t h a s p e c i f i c h e a t i n g v a l u e o f 12,600 BTU p e r pound.  (11)  TABLES AND FIGURES  (12)  TABLE 1. 1  F o r e c a s t o f P a c i f i c Rim Demand f o r Steam Q u a l i t y c o a l t o 1990 and E s t i m a t e s o f Market Share f o r U.S. Western Case.  ( i n m i l l i o n metric tons)  PACIFIC RIM TOTALS (a) 1981  (b) 1985  Total Demand  Total Demand  (c) 1985  Total Demand  3.6  77.5- 92.5  13.3-16.3  20.8- 22.5  2.8- 3.1  34.3-37.7  11.1  17.4-19.1  2.3- 2.6  Iron & Steel  4.0  5.5  1.0- 3.0  Other  3.6  8.4  1.6  65.6-70.7  8.5-10.8  Power  Cement  24.8  Source:  (e) 1990  Estimate o f Western U.S. Mkt Share  6.1  Electric  (d) 1990  Estimate o f Western U.S. Mkt Share  7.0  1.2- 3.5  12.4  1.4- 2.6  117.7-134.4  18.7-25.5  Western Governors P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Western U.S. Steam C o a l E x p o r t s t o t h e P a c i f i c Rim B a s i n , (New York, M c G r a w - H i l l , 1982). p . 85  (13)  TABLE  1.2  D e l i v e r e d Western C o a l P r i c e s To Japan - 12/81  NET TON MINE  CIF - Japan - M/T  Utah  Colorado  $20.00  $62.30  $66.40  $22.00  $64.50  $68.60  $24.00  $66.70  $70.80  $26.00  $68.90  $73.00  $28.00  $71.10  $75.20  Source:  P r e s e n t a t i o n o f Thomas E. B o e t t g e r , P r e s i d e n t , Western A s s o c i a t e d C o a l Corp. A t P a c i f i c Rim C o a l Trade Conference, January 18-19, 1982, H o n o l u l u , Hawaii.  (14)  CHAPTER"2  PACIFIC"RIM"MARKET"FOR STEAMING"COAL  PART"I- ---'EMERGENCE OF"THE"TRADE  A.  DECREASING ENERGY'DEPENDENCE"ON"OIL  The  Organization  1960  by  a  of  small  Petroleum  number  d i s s a t i s f i e d w i t h the way industry to  of  13  petroleum  Countries  (OPEC) was  exporting  countries  o i l from  o i l producing countries.  the  Commencing w i t h  major companies.  I t has  b u i l d huge f o r e i g n c u r r e n c y r e s e r v e s a t the powers  and  product.  effectively reallocated The  continuing  Arab o i l embargo d u r i n g one  hundred and  opened  the  a  its  of  in  were  expanded  "declaratory  e f f e c t i v e l y gained c o n t r o l  of  then used c a r t e l economics  to  expense o f Western i n d u s t r i a l  sizeable  portion  of  the  world's  r a p i d e s c a l a t i o n o f o i l p r i c e s combined w i t h the  autumn and  winter  of  1973/74, p l u s  t h i r t y percent e s c a l a t i o n of o i l p r i c e s i n  eyes  which  From t h i s meager b e g i n n i n g OPEC has  statement o f p o l i c y " made i n 1968,^ OPEC has the  created  the major o i l conglomerates were c o n t r o l l i n g the  p r i c i n g structure.  include  Exporting  Western  industrialized  nations  to  1978  the  the  rapid  and  1979,  their  energy  vulnerability.  This  perceived  emergence  of  v u l n e r a b i l i t y has coal  use  for  energy  been  the  purposes.  prime  factor  Many expect  behind  the  re-  continuing  oil  p r i c e e s c a l a t i o n combined w i t h an almost c e r t a i n s c a r c i t y o f o i l and  (15)  other  conventional  fossil  s e v e r a l decades.  fuels  The  (naturally  and  potential  justified  the  stakes  supplied living, crisis  energy  resources  sources  of  are  very  high;  can  materially affect  i t s i n d u s t r i a l base, and is a reality,  politically)  within  the  i n d u s t r i a l i z e d n a t i o n s are r e - a s s e s s i n g t h e i r  requirements as  or  supply. an  Their  on  country's  are  foreign  standard  i t s g e n e r a l economic h e a l t h .  t o b e l i e v e otherwise  energy  concerns  overdependence a  next  The  of  energy  c o u l d l e a d t o a n a t i o n a l energy  c a t a s t r o p h e i n l e s s than a g e n e r a t i o n .  With  these  serious  become a c r i t i c a l years  ago  circumstances  surrounding  energy  planning,  i t e m i n most l o n g range energy b u d g e t s .  i n d u s t r y spokesmen c o u l d  foresee  an  impending  coal  As many as t e n fuel  crisis  were c o n f i d e n t t h a t c o n s e r v a t i o n measures c o u l d r e s o l v e the problem. d i d not f o r e c a s t the r a p i d growth o f energy requirements the w o r l d  economy.  At t h a t time, t h e r e were few  as a major energy s o u r c e . industry"  The  use  virtual apparent  than  in  They  i n a l l sectors of  forecasts regarding coal  i n c o m p a t i b i l i t y of the energy  requirements  goals.^  o f c o a l as an energy source certainty.  but  I n s t e a d t h e r e were p r e d i c t i o n s o f a " s i c k c o a l  c h a r a c t e r i z e d by the  and the environmental  has  Nowhere has the  Far  i n the medium and  l o n g term i s now  a  the need f o r g r e a t e r c o a l use become more  Eastern  nations  o f Jthe  Pacific  Rim.  These  c o u n t r i e s ( p r i n c i p a l l y Japan, Taiwan and South Korea) a r e n o t endowed w i t h an adequate n a t u r a l r e s o u r c e energy base and must l o o k t o e x t e r n a l markets to 86%,  secure 82%,  their and  fuels. 63%  Japan, Taiwan and  respectively  of  their  (16)  Korea were f o r e c a s t t o total  primary  energy  in  import 1980.  70%,  71%,  and  supplied  by  Japan,  of  imported  generation electric  61%  this oil.^  i n Japan d u r i n g  13%,  nuclear  Taiwan,  and  total H.  P.  1978,  11%,  primary Drewry  Korea  gas  are  11%,  and  presently  as  well  energy. terms  As of  as  alternatives  power.  hydroelectric  The in  LNG  plans  for  I f the  imports  development  w i l l become one  are  and  the  programs.  of  the  steel  34  tons of  million  steam c o a l by  f u e l , hydro-  on  a major  increased power  being  supplier.  and  use  of  nuclear in  principal  from o i l - f i r e d e l e c t r i c i t y natural  gas,  and  o i l consumption w i l l continuation  of  i t i s forecast  the to  hydro-  lead  fully  t h a t the  and  Far  65  million  and  Eastern coal.  developments i n  to  a  realize  planned, Japan a l o n e w i l l increasing  to  nuclear  l a r g e s t markets i n t h e r m a l energy  1985,  fuel  considered  Their  However, i n o r d e r  i n d u s t r i e s p r o c e e d as  be  4  i n the  expansion o f c o a l f i r e d g e n e r a t i n g c a p a c i t y  cement and  1990.  and  the  embarking  sources  reducing  g o a l s o f energy d i v e r s i f i c a t i o n  countries  the  require tons  by  5  T a b l e 2.1  indicates  a fuel for their 1990  product  6%.  would  for e l e c t r i c i t y  of  hydroelectric  o i l , these  of  59%  cement p r o d u c t i o n t o c o a l , n u c l e a r ,  increase  their  gas,  i s t o accomplish a smooth t r a n s i t i o n  g e n e r a t i o n and  large  to  diversification  objective  electric  l i q u i f i e d natural  that  coal  source d i v e r s i f i c a t i o n program which w i l l r e s u l t coal  respectively  reports  o i l constituted  natural  South  energy  Japan  clearly  the  desires  o f these n a t i o n s t o reduce o i l as  e l e c t r i c generating capacity.  intends  generating capacity  to  reduce  t o 24%,  In the p e r i o d  i t s o i l dependence from 47.4%  Taiwan from 60.3%  (17)  t o 26%  and  from 1980 of  to  projected  South Korea from  61.6% use  t o 12.1%. in  the  percentage  Tables  6  broader  2.2, 2.3, and 2.4 show t h e d e c l i n i n g o i l  spectrum  of  Total  Primary  Energy  energy  (TPE).  As  a  tage o f TPE from 1980 t o 1990 o i l changes from 70% t o 52% i n  Japan, 71% t o 42% i n Taiwan, and 61% and 17% i n Korea.^  The  forecasts  o f energy shares by r e s o u r c e a r e dependent on a number o f  key f a c t o r s :  (a) the growth and demand f o r e l e c t r i c i t y  (b) t h e g e n e r a l  economic  the uninterrupted and  growth and h e a l t h o f t h e v a r i o u s economies; (c)  expansion o f nuclear  (d) some s t a b i l i t y  over t h e p e r i o d ;  development programs  i n t h e crude o i l markets.  Most o f t h e s t u d i e s on  t h i s t o p i c have c o v e r e d a number o f s c e n a r i o s r e l a t i n g t o : economic growth r a t e s , moratoriums  on  approximation escalation,  nuclear of  the  as f o r e c a s t ;  (1) d i f f e r e n t  (2) d i f f e r e n t o i l p r i c e e s c a l a t i o n l e v e l s , and (3) expansion. base  and c o n t i n u e d  case,  nuclear  The  thesis  (4-6% GDP expansion).^  will  concentrate  growth, Under  2-3%  on  an  o i l price  an o i l and n u c l e a r  energy s h o r t f a l l s i t u a t i o n , i t i s f o r e c a s t t h a t s u b s t i t u t i o n o f c o a l would cause 38%,  imports  t o Japan, Taiwan and Korea t o i n c r e a s e by  57%, and 54%, r e s p e c t i v e l y  1980-1985.  B.  of thermal coal  above the base i n d i c a t i o n s  i n the p e r i o d  9  DIVERSITY"OF"ENERGY FORMS"AND SOURCES  Even i n t h e most p e s s i m i s t i c economic growth s c e n a r i o , i t i s apparent t h a t the P a c i f i c  Rim c o u n t r i e s o f Japan, Taiwan and Korea, w i l l  increase  their  imports  o f steam  reducing  their  energy  dependence  coal  consistent  on o i l .  (18)  with  The c o a l  substantially  the objective  user  companies  of and  responsible strategies  government which  agencies  diversify  the  are  defining  energy  supply  and  implementing  among d i f f e r e n t  import  forms  and  suppliers.  Several  studies  important price.  have  has  yet  A c c o r d i n g t o t h e U.S.  to  that  the  t o the t h r e e main P a c i f i c Rim This  Pacific  concluded  Rim  purchasers  to  be  proven  supply  diversity  issue  i m p o r t i n g n a t i o n s as the  through  their  purchasing  is  delivered  policies.^  Department o f Energy, I n t e r Agency Task F o r c e , are  e n t e r i n g i n t o l o n g term  seeking to s a t i s f y c o n t r a c t s w i t h any  as  a number o f c r i t e r i a  the  prior  s u p p l i e r n a t i o n o r company.  T h e i r p r e f e r e n c e s a r e as f o l l o w s  (i)  A politically to  support  the  s t a b l e c o u n t r y where the government i s p r e p a r e d continuous  export  of coal  f o r the  term  of the  contract.  (ii)  A r e a s o n a b l y harmonious management/labour r e l a t i o n s h i p i n the coal producing sector.  (iii)  A s u p p l y o r mine owning company t h a t i s o f a s i z e , c h a r a c t e r , and  corporate  structure that  honored throughout  First  a  long  term  contract w i l l  be  its life.  a group o f c o u n t r i e s and companies w i l l be s e l e c t e d a c c o r d i n g t o the  above c r i t e r i a . purchasing  agents,  It w i l l  then  become the  r e g i o n a l purchasing  (19)  t a s k o f u t i l i t y / c e m e n t company  agencies  (eg. E P D C ) , ^ u s e r  group  purchasing departments  committees  trading  companies,  and  government  ( i n the case o f n a t i o n a l l y r u n power companies i n Taiwan and  K o r e a ) , t o develop but  (eg. J C D C ) , ^  not l i m i t e d  and pursue  t o some  a steam  coal  of the following  p u r c h a s i n g program  including  factors  political  (excluding  i s s u e s f o r the p r e s e n t t i m e ) : ^  (i)  S u p p l i e s t o be drawn from sources meeting  the c r i t e r i a  as p e r  numbers 1, 2, and 3 above.  (ii)  Price  to  be  one  of  the purchasing  determinants  but not  n e c e s s a r i l y t h e most i m p o r t a n t .  (iii)  40-80% (or some d e f i n e d range) o f requirement l o n g term  (iv)  Balance contracts take  t o be f i l l e d by  10-15 y e a r c o n t r a c t s .  of  requirement  to  be  purchased  on  spot-5  year  a t t e m p t i n g t o absorb t h e f l u c t u a t i o n i n demand p l u s  advantage  of  favourable  market  c o n d i t i o n s when  they  exist.  (v)  Negotiate  with  "market"  or  lowest "world  cost price"  producers to  be  first used  to on  establish subsequent  transactions.  The  Pacific  Rim c o u n t r i e s want t o a v o i d g e t t i n g  OPEC s i t u a t i o n  and a r e i n d i c a t i n g  themselves  into  another  a preference f o r purchasing t h e i r  (20)  coal  from  as many p r o d u c e r s  as  possible.  t h i s d i v e r s i t y of supply.  There  I f c o s t was  i s a premium t o be  paid for  the o n l y p u r c h a s i n g determinant  t h i s market i t i s r e a s o n a b l e t o presume t h a t A u s t r a l i a would be the l o n g term and  contract supplier.  Korea  they  accept  paying  a premium  expected  Additionally,  newer  capital  intensive,  present  installations.  noted  forms as  flexibility;  t o s t i m u l a t e the Western  and  i n t h e i r Far  By i n c r e a s i n g s u p p l y , a p r i c e d e c l i n e c o u l d be constant.  clearing price  diversification  of attempting  i f demand were h e l d  increase.  As  for this  a number of o t h e r c o u n t r i e s t o p a r t i c i p a t e  E a s t e r n steam c o a l market.  single  P r e s e n t i n d i c a t i o n s a r e t h a t Japan, Taiwan,  a r e p r e s e n t l y i n the p r o c e s s  U n i t e d S t a t e s and  in  the  sometimes This  However, demand i s f o r e c a s t  facilities  more  new  are  operationally  tonnage  could  considerably expensive  increase  more  than  the  to  the  market  (more w i l l be s a i d on t h i s t o p i c l a t e r i n the c h a p t e r ) .  earlier, w e l l as  the  energy  supply  diversification  sources.  The  policies  apply  to  energy  p r o s p e c t o f n u c l e a r , n a t u r a l gas,  and h y d r o e l e c t r i c energy w i l l be d i s c u s s e d b r i e f l y w i t h a mention o f o t h e r energy  sources  Tables  2.1,  nuclear both  primarily  2.2,  2.3,  as and  and h y d r o e l e c t r i c  the  electric  derivatives  of  2.4,  forecast  i t is  resources w i l l  g e n e r a t i o n source  these  three or c o a l . that  western  the p e r i o d from coal  exports  1980  to  energy  1990.  to v a r i a b l e s  such  and  T a b l e 2.5 as  n u c l e a r , and i n c r e a s e d c o a l market share.  (21)  natural  represent a substantial the  total  Each o f these e n e r g i e s a r e f o r e c a s t t o i n c r e a s e t h e i r during  the  primary  share  As  per gas,  share  energy.  substantially  shows the s e n s i t i v i t y  reduced  of  power growth,  of  reduced  1.  NUCLEAR"ENERGY  It  i s recognized  that  the future  growth o f n u c l e a r  capacity w i l l  s u b s t a n t i a l impact on c o a l f i r e d e l e c t r i c i t y g e n e r a t i o n , increase  i n capacity  m i l l i o n tons.15 countries  will  reduce  coal  consumption  saw n u c l e a r  appeared  anticipated serious though  to  question  a  secure  of the nuclear  and planned projections  energy  capacity of nuclear  increase  s i g n i f i c a n t l y during the period  International between  Policies  Energy  and Programs  Agency  forecast  electricity  Although  t h e I.E.A.  source.  option  scaled  capacity  power  source  1980 t o 1990.  nuclear  terms and i n c r e a s e  power from  down.  Even t o be  i s expected  to  study  Countries), the will  quadruple  11% t o over 25%  generation.^  does n o t c o n c e n t r a t e  have on t h e use o f s o l i d be l i t t l e  into  continue  solely  on the t h r e e  P a c i f i c Rim n a t i o n s , i t does h i g h l i g h t t h e impact t h e n u c l e a r  will  the  brought  In a r e c e n t  o f t h e I.E.A.  that  T h i s was  Recently,  has been  areas  energy  o f the nuclear  1978 and 1990 i n a b s o l u t e  of t o t a l  there  2.5  advanced, b u t a l s o because  i n most  the contribution  Energy  well energy  reduced,  (entitled  by a p p r o x i m a t e l y  power as t h e most a t t r a c t i v e a l t e r n a t i v e .  represent  benefit  official  as e v e r y 1,000 MW  A t t h e time o f t h e o i l c r i s i s , t h e i n d u s t r i a l i z e d Western  p a r t l y because t h e programs were a l r e a d y it  have a  f u e l s such as c o a l .  change  i n the proportion  principal  option  could  The I.E.A. study f o r e c a s t s of e l e c t r i c i t y  generated  from c o a l through t h e mid 1980's, which, on the b a s i s o f t h e f u e l  inputs  foreseen,  output  remains a t 3 7 . 5 % . ^  from the c o u n t r i e s  Oil's  share o f f u e l i n g e l e c t r i c i t y  c o v e r e d by t h e I.E.A. study, reduces from 21% i n 1978  (22)  to  18.5% i n 1985 and a p p r o x i m a t e l y  natural  gas  falls  appears  t o have  from  11% i n 1 9 9 0 .  11% t o 5%  underestimated  over  S i m i l a r l y , the share o f  18  the same p e r i o d . ^  the c o a l  energy  i n 1980 o i l s u p p l i e d  44% o f e l e c t r i c a l  t o 17.6% i n 1990 and 11% i n 2 0 0 0 .  Coal  forecasts  could  be  planned  should  conservative  planned  35,000  megawatt  received  official  of this  i f the  changing  electricity  demand  demand u n c e r t a i n t y ,  and  the smaller bring  flexibility coal. nuclear  a  nuclear  process,  could  any  see  i n h i s power p l a n n i n g  the c u r r e n t the 2  operation.  had n o t  A d d i t i o n a l delays  c o a l f i r e d s t a t i o n s may r e p r e s e n t  into  power  However, i t  i n Japan  energy r e q u i r e m e n t s . ^  investment and s h o r t e r  plant  1981.  as a  rapidly  nuclear  option  In l i g h t o f t h e  a better alternative  l e a d times r e q u i r e d t o c o n s t r u c t  Providing  the  end  user  with  more  system may be an important a t t r i b u t e o f  T a b l e 2.6 shows t h e I.E.A. comparative c o s t e s t i m a t e s f o r new o i l , and c o a l - f i r e d  electricity  generation.  m i l l i o n BTU, c o a l i s $1.13 and o i l i s $ 3 . 3 3 .  In  nuclear  60% o f the c u r r e n t l y  capacity  combined w i t h  forecasts,  of t o t a l  decrease  30% t o 50% o f new power c u r r e n t l y  a u t h o r i z a t i o n as o f June,  decrease as a p r o p o r t i o n  given  forecasted  t o Westpo data n e a r l y  additional  authorization  forecasts  power but t h i s w i l l  i n Japan, Taiwan and Korea i s t o be n u c l e a r .  be noted t h a t a c c o r d i n g  result  C. I t o h  Rim  2 0  growth proves t o be o v e r l y o p t i m i s t i c . being  I.E.A.  use i n the P a c i f i c  c o u n t r y o f Japan, and does n o t address Taiwan o r Korea. that  The  9  event  the n u c l e a r  environmentally,  power  and t e c h n i c a l l y .  industry  Nuclear cost  i s $.065 p e r  22  i s i n trouble,  economically,  I t s f u t u r e development i s c l o u d e d w i t h  (23)  serious  uncertainties  and  resolution  depends  largely  on  t h e domestic  p o l i c y d e c i s i o n s o f t h e r e p r e s e n t a t i v e P a c i f i c Rim Governments.  2.  NATURAL"GAS  Natural  gas  is a  residential,  clean  commercial  n a t u r a l gas p r o v i d e d  and  efficient  and l i m i t e d  fuel  industrial  favourable  f o r use i n  applications.  a p p r o x i m a t e l y 17% o f t h e w o r l d energy s u p p l i e s o r t h e  e q u i v a l e n t o f 21 m i l l i o n b a r r e l s p e r day o f o i l e q u i v a l e n t . 2 3 will  likely  over  the next two decades.  located level  not maintain  exports  Additionally, and  an i n c r e a s e d  i n OPEC c o u n t r i e s of  discoveries  to  A great  share o f w o r l d  energy  N a t u r a l gas requirements  d e a l o f t h e n a t u r a l gas r e s e r v e s a r e  which can be expected  support  regulations  commercial  In 1978  continued  and p r i c i n g  high  structures  t o put c e i l i n g s gas  and  on t h e  o i l prices.  (related to residential  use) have impeded the development program f o r n a t u r a l gas  i n Western  nations  and w i l l  likely  continue  t o hamper i t s  expansion.  The  capital  shipping liquified  intensive  of natural natural  1985.  specialized  gas a l s o  serve  increase  1990 n a t u r a l  of  t h e development  t o impede i t s development.  and  Trade i n  t o 1.5 m i l l i o n b a r r e l s p e r day o i l e q u i v a l e n t  To g e t t o 5 MBDOE by t h e end o f t h e c e n t u r y  r e q u i r e massive new i n v e s t m e n t s . ^ and  nature  gas i n 1978 was 500,000 b a r r e l s p e r day o i l e q u i v a l e n t  (BDOE) which c o u l d (MB DOE) by  and  Table  4  2.2 i n d i c a t e s t h a t between 1985  gas as a percentage o f t o t a l p r i m a r y energy w i l l  from 7% t o 9% i n Japan, i n f o r m a t i o n  would  change  f o r Taiwan and Korea i s n o t a v a i l a b l e .  (24)  HYDROELECTRIC POWER  Hydroelectric  power  i s the  principal  currently provides a s i g n i f i c a n t of  energy produces  of  the t o t a l  developed in  world  energy  needs.  2 5  With  i n Western n a t i o n s , t h e l a r g e s t  most  coal  energy.  prime  needs and 5% already  appears  New t e c h n o l o g y and reworking o f e x i s t i n g  source w i l l  that  T h i s type  locations  growth p o t e n t i a l  t o be  facilities  source w i l l m a i n t a i n i t s 5% share  t h e w o r l d energy s u p p l y a t t h e y e a r 2000. this  source  a p p r o x i m a t e l y 20% o f t h e world e l e c t r i c i t y  developing areas.  countries  energy  amount o f commercial  c o u l d make i t p o s s i b l e t h a t t h i s energy of  renewable  I n r e g a r d t o t h e P a c i f i c Rim  have a n e g l i g i b l e  effect  on the import  steam  requirements.  ADDITIONAL OIL AND"GAS"SOURCES  Unconventional pressurized  sources  o f gas i n c o a l  beds,  shales,  t a r sands,  and geo-  f o r m a t i o n s may c o n t a i n v e r y l a r g e amounts o f energy.  A large  r e s o u r c e base a l s o e x i s t s f o r u n c o n v e n t i o n a l o i l i n o i l s h a l e , t a r sands, and heavy o i l . ^  The development o f these energy s o u r c e s i s c h a r a c t e r i z e d  2  by  very  high  innovations sources, supplying commercial  capital  make  way  costs  f o r less  i t i s reasonable a part  and  to  o f t h e world's  s c a l e can be expected  long  lead  expensive expect energy  that  times.  As  developments they  needs.  will  Their  technological  of  these  fuel  participate  introduction  in  on a  l a t e i n t h i s c e n t u r y w i t h an a n t i c i p a t e d  r a p i d development e a r l y i n the next c e n t u r y .  (25)  ADDITIONAL"RENEWABLE"ENERGY"SOURCES  Energy  technology  electricity,  i n solar  water  photovoltaic  and  energy  space  heating,  conversion,  solar  biomass  generated conversion,  w i n d m i l l s , ocean-thermal energy, wave energy, t i d a l energy, and geothermal energy  provide  sources of the is  small  could provide  amounts o f commercial  possibility ultimately  f o r major possible,  innovations and may  become a p r i n c i p a l  t h e next  with  developing forms.  additional  be  source  Although  a  the next  necessity  o f world  many exists  s e v e r a l decades. that  these  It  renewable  energy s u p p l i e s by t h e m i d d l e  technologies of  energy  relating  sources  to using  the technologies  potential  o f non-coal  COAL  renewable  there  are  fuels  a  number  derivatives of coal  are considered  t o have  and have been i n v o l v e d i n l e n g t h y  speed o f use o f these  price  over  These  century.  Some  commercial The  today.27  s u b s t a n t i a l promise f o r the f u t u r e .  ADDITIONAL ENERGY"FORMS~FROM  As  energy  t h e s e t e c h n o l o g i e s a r e i n t h e i n f a n c y o f t h e i r development t h e r e  sources of  only  as energy near  testing  of  term  programs.  t e c h n o l o g i e s w i l l be p r i m a r i l y dependent on the a s these  coal  derivatives w i l l  be  high  cost  sources.  (a)  Synthetic  fuels  This  involves  o r gaseous  product.  solid,  liquid  tested  s i n c e 1962  -  using  coal  t o produce  L i q u e f a c t i o n has been  (Solvent Refined Coal Process)  (26)  a  and s e v e r a l  t e s t p l a n t s a r e now o p e r a t i n g i n t h e range o f 50 tons p e r day. Gasification time  with  has been new  used  highly  commercially  efficient  i n Europe  processes  for  f o r some developing  s y n t h e t i c n a t u r a l gas from c o a l .  (b)  Methanol recovery  production is  - although  approximately  technically  40-50%  developed,  which  makes  energy  cost  of  r e s u l t i n g energy v e r y h i g h .  In a d d i t i o n t o the d e r i v a t i v e energy forms, t h e use o f c o a l i s a l s o b e i n g improved and  through  Coal/Oil  t e c h n o l o g i c a l advances  mixtures.  These  such  improvements  as F l u i d i z e d Bed Combustion are f a c i l i t a t i n g  operating  e f f i c i e n c i e s i n t h e use o f c o a l , expanding i t s range o f uses, and r e d u c i n g e n v i r o n m e n t a l l y damaging  C.  by-products.  BALANCE OF'PAYMENTS "ISSUES  Presently there exists a trade d e f i c i t between  the U n i t e d  States  and Japan,  o f approximately 4.3  billion  18 b i l l i o n  dollars  between the  U n i t e d S t a t e s and Taiwan and .4 b i l l i o n d o l l a r s between t h e U n i t e d and  South K o r e a .  the  overvalued  interest  With t h e world  2 8  U.S. d o l l a r  economic  holding strong  r a t e s , the prospects  States  slowdown w e l l entrenched  as a r e s u l t  f o r improving  dollars  these  o f continued  trade  imbalances  and high are  dim.  With  the exception  States  could  of military  export  mechanized  products,  i t i s unlikely  equipment, (27)  machinery,  t h a t the United or semi-finished  products  to  any  considerably products.  of  less  The  these  c o u n t r i e s which  expensive  labour  only reasonable  force  have  an  capable  equally of  making  a l t e r n a t i v e appears t o be  export  of  the  have a t w o - f o l d is  the  obvious  cargoes  and  effect  to  c o a l from the U n i t e d  on  reduction  flowing  incremental  thermal  the  production  the b a l a n c e i n the  Pacific or  inventory  through  Secondly  the  domestic  The  payments  new  mines  United  of  option.  S t a t e s Western mines  deficit  to  same  States  first  for may  can  the sell  utilities  i n d u s t r y t h e r e b y r e d u c i n g the need f o r imports o f f o r e i g n o i l o r o t h e r  energy  supplies.  With  the  West Coast  p r e s e n t l y b e i n g d i s c u s s e d , and of  Rim.  the  o f payments s i t u a t i o n .  trade  and  i n the e x p o r t  raw m a t e r i a l s o f which c o a l promises t o p r e s e n t a r e a l i s t i c  The  skilled  $60/ton  (assuming  ocean  t r a d e c r e d i t s would accrue 1.32  billion  dollars  in  steam  coal trade  levels  assuming an F.O.B.T. p r i c e  carriage in foreign flag i n the  1990,  amount o f  2.1  558  billion  dollars  i n 1982  and  million  that  dollars  owned  vessels)  dollars in  in  1995,  are  and  1985, 2.86  b i l l i o n d o l l a r s i n the year 2000.29  PART"II  A.  ---"PRESENT"MARKET  VOLATILE"MARKET"HISTORY  The  past  Coast nearly  three  steam zero  years  coal  exports  i n 1979,  tons i n 1981. " 3  have  represented to  grew t o  I t i s now  Japan, 1.5  a  very  Taiwan,  million  tons  volatile  and  period  Korea.  i n 1980,  The and  trade  to 5  f o r e c a s t t o d e c l i n e t o approximately  (28)  f o r West was  million  4 million  tons i n 1982. Coast and  Unfortunately  31  ( c o i n c i d i n g with labour  this  charged  time  frame the  exorbitant  CIF  shortage p r e d i c a m e n t . Pacific c o s t and  Rim  problems i n A u s t r a l i a ) has  countries  s u p p l i e r s or  not  given  supply  were  the  coal  purchasing  felt  to  that  take  they were  advantage  being their  suppliers indicated that  inventories  at  p r i c e s below  spot market which has  the full  f u t u r e would  These d i v e r s e market views have impeded  1981  and  Western mines i n c r e a s e d  and  of  t h a t are needed t o develop t h i s t r a d e  sold during  transportation  quarter  buyers  and  be the  have  not been b e n e f i c i a l to e i t h e r  users.  With i n v e n t o r y  the  for  Rim  C o n v e r s e l y , the U.S.  3 2  more e x p e n s i v e .  resulted in a cyclical  1982,  Pacific  prices  long-term volume c o n t r a c t s  sectors  potential  o v e r s u p p l y problem and  1982  promises o f a c o n t i n u e d  production,  geared annual  up  only  demand.  new to  growth market  mines were opened, face  There  a  slackening  i s presently  a  and  first serious  buyers are t a k i n g advantage o f e x c e l l e n t p r i c e s i n  p u r c h a s i n g mine i n v e n t o r y  B.  i n demand from the West  t h a t the r e a l p r i c e o f replacement tonnage i n the  considerably  is  rapid increase  demand nor p r i c e s a chance t o s t a b i l i z e i n t h i s market.  During  in  the  once a g a i n .  Until  u n l i k e l y t h a t a s t a b l e U . S . / P a c i f i c Rim  these swings are  trade pattern w i l l  arrested i t develop.  SLOWED'ECONOMIC"GROWTH"OF"PACIFIC"RIM"COUNTRIES  With Rim  the  worldwide  nations  economic  slump becoming more entrenched, the  o f Japan, South Korea and  (29)  Pacific  Taiwan have not been exempt from  the  slowdown o f r e g u l a r t r a d e p a t t e r n s . economies less other  a r e more  oriented  to f o r e i g n  actions  partners  as  susceptible  a  method  to  trade.  are being  Due  fluctuations  curb  than  by many o f these  imports  and  their  c o u n t r i e s which  Additionally, protective  implemented  to  t o t h e i r l a r g e e x p o r t base,  are  t r a d e laws  countries'  stimulate t h e i r  own  and  trading lagging  economies.  As  recently  forecast  as  the  t o grow a t 6%,  electric  generating  respectively.  3 3  approximately If  1978  Japan's  6.5%,  energy  I t now  4-5%  economies o f Japan,  would decrease by 2 0 % . ^ 3  from  energy 5%  slower  economic  i n the P a c i f i c Rim steam  coal  planning  trade.  stage  and  Until  the p e r i o d t o 1990,  with  at  8%,  9.5%,  and  i n 1990,  will coal  decrease (MTCE)  34  3% i n 1990  and  i n Korea  11%  grow a t also.  imports  In Taiwan i f growth decreased from 6% t o 4%  growth and  coal  i f growth d e c l i n e d from  7%  24%. ^ 3  i t s impact  on the demand f o r e l e c t r i c i t y  c o u n t r i e s w i l l have a major e f f e c t on the growth o f the Many o f the c o a l can  e l e c t r i c i t y demand f a l l planned v e r s u s  were  requirements  t o 4%  t o 5% c o a l imports i n 1990 would decrease  This  Korea  growing  South  t h a t each o f these economies w i l l  forecast  growth decreased  7% throughout  requirements  appears  and  imports would decrease  and  Taiwan and  be  deferred  conversion projects or  below f o r e c a s t s .  cancelled  a r e o n l y i n the  i f necessary  See T a b l e 2.7  should  f o r indications of  f i r m e l e c t r i c power i n d u s t r y g e n e r a t i n g f u e l  requirements.  i t i s b e t t e r known what r e a l growth these economies w i l l  experience  and the r e s u l t a n t energy r e q u i r e m e n t s , i t i s l a r g e l y s p e c u l a t i o n as t o the l e v e l s o f West Coast steam c o a l t r a d e which w i l l  (30)  materialize.  C.  ENERGY CONSERVATION  The  World  Coal  the  world's  Study p r e d i c t e d  l a r g e s t energy  that  conservation  "resources". ^  This  3  i m p o r t a n t as energy becomes more expensive and  may  well  will  become o f  the  become p a r t i c u l a r l y  t h e r e b y i n c r e a s e s the  value  t o an economy o f a c o n s e r v e d energy u n i t .  The  initial  short-term  10-15% o f energy s a v i n g s measures such as  controls.  immediate measures w i l l  require  by  relatively  simple  insulation, better building  To expect a d d i t i o n a l g a i n s beyond these capital  investments and  substantial  lead  These d e c i s i o n s must be made d u r i n g the p r o c e s s o f the t u r n o v e r  a p a r t i c u l a r country's c a p i t a l national financial  and  local  incentives  energy c o n s e r v a t i o n be  obtainable  car p o o l s , b e t t e r  codes, improved h e a t i n g  times.  are  strategy as has  well  stock  and  possibly as  must be enhanced  policies  been a r e a c t i o n a r y  changed i f i t i s t o p l a y  and  implemented as p a r t o f a through  regulations.  p r o c e s s and  a major r o l e i n the  of  tax  and In  the  this w i l l  d r a f t i n g of a  other past  need t o  country's  energy budget.  The  w o r l d c o a l study and  many o t h e r  recent  f o r e c a s t s t h a t major e f f o r t s a t c o n s e r v a t i o n out as m a t t e r s o f n a t i o n a l concern. year  2000, c o n s e r v a t i o n  could  below what o t h e r w i s e would be  r e p o r t s have i n c l u d e d i n t h e i r w i l l become a r e a l i t y c a r r i e d  They have gone f u r t h e r t o say t h a t  reduce energy consumption t o required.  (31)  3 8  by  l e v e l s 20-30%  PART - i n  A.  - SUPPLY "AND" DEMAND  SUPPLY"BY"MAJOR"RESOURCE"OWNERS  In  the  discussion  distinction According taken the  must  to  of  be  the  any  bulk  drawn  commodity  between  reserves  to  under  the  paper  will  The  IEA  deal  and  changing  the  approximately  in  estimates  can  economic with  the of  be  of  regarded  new  world's  of  metamorphism  content) present  o f the in coal.  or  grade.  coalification  recoverable  actually  reserves  coal. The  (percentage  Grade r e f e r s  rank o f a p a r t i c u l a r  is  presence  primarily  t r a c e elements.  by  the  See  Table  today. ^  1973  This  4  that  they  efforts. have  are  As  an  increased  by  as a r e s u l t o f the and  1974.41  of  fixed  carbon  and  heat  t o the amount o f c h e m i c a l i m p u r i t i e s  the age  ash, and  as  Rank g e n e r a l l y r e f e r s t o the degree  the c o n d i t i o n s o f f o r m a t i o n and determined  recoverable  exploration  i n c r e a s e d e x p l o r a t i o n s i n c e the f i r s t o i l shock o f  are  economically  185 b i l l i o n tons o f c o a l e q u i v a l e n t (TCE)  C o a l i s c l a s s i f i e d by rank and  "reserves".  a t some time i n  recognizing  coal  important  g e o l o g i c a l resources  and  reserves,  an  and  conditions prevailing  light the  coal  become o f economic v a l u e  that  strictly  as  "resource"  Agency,  describes technically  mean r e s e r v e s technical  constantly example,  3 9  terms  I n t e r n a t i o n a l Energy  to mean r e s o u r c e s t h a t may  future.  the  such  2.8  determination of coal q u a l i t y .  (32)  and of  c o a l source  i s determined  depth o f the c o a l . i m p u r i t i e s such  as  The  by  grade  sulphur,  f o r i n d i c a t i o n s o f rank and  grade  A l t h o u g h c o a l d e p o s i t s a r e d i s t r i b u t e d throughout presently  account  reserves. the  Table  4 2  International  study.  for  approximately  2.9 i n d i c a t e s Energy  I t can be  seen  in  t o 662 b i l l i o n  the ICF Study.  that  of coal  world's  r e s e r v e s p r o v i d e d by and a more r e c e n t ICF  i n t h e s h o r t p e r i o d from  from a p p r o x i m a t e l y  estimated  1978 t o 1980 t h e  637 b i l l i o n  tons i n t h e IEA tons  I t i s p r e s e n t l y a n t i c i p a t e d t h a t t h e r e w i l l be few new  a mature c o a l m i n i n g larger  the  tons i n the World C o a l Study up t o 766 b i l l i o n  major c o a l r e s e r v e s found  be  the l e v e l  of  Agency, World C o a l Study,  r e s e r v e f o r e c a s t has r i s e n Study  90%  the world, t e n c o u n t r i e s  i n developed  industry.  c o u n t r i e s which p r e s e n t l y m a i n t a i n  I t i s expected, however, t h a t t h e r e  will  r e s e r v e s i d e n t i f i e d as f u r t h e r e x p l o r a t i o n i s made o f t h e known  resources.  The  major  Australia,  suppliers  o f steam  coal  Canada,  t h e U.S.A.,  t o the P a c i f i c  South  Africa,  Rim c o u n t r i e s w i l l  and C h i n a .  Their  be  market  shares w i l l v a r y i n the f u t u r e a c c o r d i n g t o p r i c i n g p o l i c i e s and p o l i t i c a l situations. forecasts  The Department o f Energy  the r e l a t i v e  supply  I n t e r n a t i o n a l C o a l E x p o r t Task F o r c e  shares  t o be as i n d i c a t e d  i n Table  2.10.  Each o f these c o u n t r i e s c l e a r l y has t h e s u f f i c i e n t r e s e r v e s t o compete as a  major  participant  i n the P a c i f i c  Rim market.  There  a r e a number o f  drawbacks r e l a t i n g t o the s u p p l y from  each c o u n t r y which w i l l  reinforce  desire  origins.  the P a c i f i c The  Rim c o u n t r i e s '  following  represents  a  number  r e s p e c t t o each o f t h e s u p p l y i n g c o u n t r i e s :  (33)  4 3  to d i v e r s i f y of possible  continue to  their  purchase  concerns  with  Australia  a)  Labour have  disputes as  yet  stoppages  b)  have  not  could  common  in  Australia,  significant. Australian  The  coal  a b i l i t y t o meet c o n t r a c t e d  commitments.  A  (presently  growing  The  domestic demand  Australian  supply  d)  been limit  some p r o t e c t i o n i s m  c)  been  to  from the  Joint  insure  Coal  that  Board  opening  t o the market.  Decisions  quantities  could  supply  Australian  coal.  c a p i t a l costs  for  to  new  funds i n A u s t r a l i a may ment r e q u i r e s than  50%,  would not  that  and be  production  l e s s than  coal  of  new  and  work their  exports) could  bring  for  indications  are  export  and  i n the  the  Australian  does  coal  by the Board t o r e s t r i c t higher  substantial  limited.  that  regulating  bring  mines are  mines  The  required private  costs  and  Govern-  p r o j e c t be  capital sector  to  for  available  Australian  f o r e i g n c a p i t a l investment i n any  r e m a i n i n g development  major  not  shortages  p r o v e to be  available  of  costs  hence  i s responsible  instability  The  prospect  their  central authorities.  the  lead  though  less  formation fund  the  costs.  South"Africa  a)  Coal mining i s presently Mining  methods  tend  to  dependent upon i n e x p e n s i v e non-white l a b o u r . be  less  (34)  efficient  than  the  more  capital  intensive rapidly  methods  used  escalating  in  competing  costs  could  hamper  s u b s t a n t i a l amounts o f c o a l i n the  b)  c)  With the c o u n t r y ' s c o n t i n u e d the  government w i l l  and  as a r e s u l t may  The  imposition  of  domestic  d e n y i n g adequate r a t e s o f  d)  The  significant  political  e)  Rim  price  unrest  and  the  This  produce  policies,  self-sufficiency  limit  future.  supplies  by  Rim  moral  and  n a t i o n a l i s t movement  perceived limit  s t a b i l i t y by their  the  willingness  contracts.  political  objections  South A f r i c a n Government may  from d e a l i n g on a s u b s t a n t i a l b a s i s w i t h t h i s  3.  could  black  could  Pacific  o f the  to  and  return.  i n t o long-term c o a l throughput  policies  ability  to i t s apartheid  controls  t o enter  apartheid  unrest  the l e v e l of c o a l e x p o r t s i n the  nations.  countries'  their  concerned w i t h energy  i n South A f r i c a w i l l c e r t a i n l y a f f e c t the purchasing P a c i f i c  Labour  future.  i s o l a t i o n due  l i k e l y be regulate  countries.  to  the  prevent  them  country.  Canada  a)  The  f e d e r a l / p r o v i n c i a l d e l i n e a t i o n of t h i s country's p o l i t i c a l  work means t h a t production. coal  the  British  producing  provinces  have c o n t r o l over t h e i r  Columbia and  regions,  have  (35)  internal coal  A l b e r t a , p r e s e n t l y the very  differing  frame-  two  policies  largest on  coal  development. control  of  perceive  b)  Inland in  continued  debate  energy r e s o u r c e s  may  transportation  is  additional  4.  cause  federal  the  Columbia concern  are  by  capacity  versus  Pacific  Rim  provincial  countries  presently  Pacific  will  Rim  not  be  nearing users  capacity that  available  to  source.  systems from the mines t o the West Coast  t h r o u g h the year 2000 s h o u l d supply  over  a degree o f i n s t a b i l i t y i n t h i s supply  British  There  The  to  large service  ports  utilization. amounts their  of  needs  a s u b s t a n t i a l requirement f o r a d d i t i o n a l  materialize.  China  a)  The  amount or  country are  q u a l i t y of  relatively  the  reserves  unknown but  are  presently  available in  thought t o be  vast  this  including  high q u a l i t y deposits.  b)  The  transportation infrastructure i s i n i t s infancy.  how  much time o r c a p i t a l w i l l be r e q u i r e d t o f a c i l i t a t e the  movement o f the  coal  from mine to  terminals  when the  I t i s not known efficient  facilities  are  available.  c)  The  government  resources. e x p o r t s and  has  They  total could  supplying  and  change  unilateral policies  control in  favour  of of  all  restricting  more domestic energy requirements w i t h  produced c o a l .  (36)  natural  locally  5.  United  a)  Although  the U n i t e d S t a t e s i s p e r c e i v e d as the most s t a b l e l o n g range  supplier  of  of  b)  States  steaming c o a l ,  t h i s energy r e s o u r c e are not c o m p l e t e l y  There appears t o be transportation.  excess  The  the  Pacific  price  do  not  be p r e p a r e d  d)  A  growing  limit  e)  In  States  appear  favourable.  Western  Prospects The  requirement  may  may  technological to  processes  coal  prior  technology  States,  the  the  export  source  for a reduction i n this  absorb  present  supply  of  market  advances a r e made.  need t o  coal.  production  to i t s shipment t o the  end  coal  and  will  Wyoming, Montana and  later  in  this  century  need t o  New as  relate  and other contaminants from the user.  a l s o p e r m i t the b u r n i n g of these  (37)  steaming  These advances w i l l  t h a t remove the m o i s t u r e  may  present  availability.  United  enter  sea  levels.  consuming n a t i o n s w i l l  o r i g i n a t e p r i m a r i l y from U t a h and C o l o r a d o . Mexico  l a n d , and  a premium f o r the s e c u r i t y o f u s i n g U.S.  domestic  export  steam c o a l i s t h e h i g h e s t p r i c e d  alternatives.  e x p o r t tonnage  the  c a p a c i t y i n the p r o d u c t i o n ,  Rim  t o pay  the  i n place.  s u b s t a n t i a l increased trade  P r e s e n t l y the U n i t e d of  t h a t support  l a c k o f a l a r g e West Coast t e r m i n a l w i l l  a b o t t l e n e c k i n any  c)  federal policies  Improvements i n b o i l e r lower q u a l i t y  fuels.  f)  The r e s e r v e s general  i n these f i v e S t a t e s a r e i n d i c a t e d i n T a b l e 2.11 and the  reserve  reserves  a r e a s on F i g u r e  I t i s evident  that  substantial  e x i s t t o more than a d e q u a t e l y cover any e x p o r t l e v e l s which  s h o u l d be r e q u i r e d  f o r the P a c i f i c  have the most mines p r e s e n t l y capacity. Pacific  2. 12.  The s h o r t  Rim steam  term  coal  i n operation  forecasts  market  from U t a h and C o l o r a d o w i l l  Rim c o u n t r i e s .  Utah and C o l o r a d o  and c u r r e n t l y have excess  o f U.S. p a r t i c i p a t i o n i n t h e  can a d e q u a t e l y be c o v e r e d .  The c o a l  be p r i n c i p a l l y s h i p p e d through  terminals  i n N o r t h e r n and i n Southern C a l i f o r n i a .  B.  DEMAND"BY"JAPAN  The  forecasts  o f the P a c i f i c  significantly. 1978 be  with seen  increased and from  Table  that  the forecast  and r e c e n t  demand  t o 61 MMT  the M i n i s t r y from  C. I t o h  have  forecasts.  f o r 1990 U.S. west  i n 1982 p r o j e c t i o n s .  of International  the Westpo  Demand"for  (i)  coal  varied  coast  I t can  coal  has  from 33.1 MTCE i n 1978 p r o j e c t i o n s t o 69 MMT i n 1981 p r o j e c t i o n s  demand  Trade  forecast  Changes i n the f o r e c a s t were e x p l a i n e d  1.  f o r steaming  2.13 compares t h e Department o f Energy f o r e c a s t i n  the 1980 Westpo f o r e c a s t  decreased  differs  Rim demand  The most r e c e n t  forecast  and I n d u s t r y  (MITI)  f o r 1990 by  6 million  as f o l l o w s :  i n Japan tons.  4 4  Electric"Power  T o t a l demand f o r e l e c t r i c power i n 1990 has been d e c r e a s e d by 12.5%  due t o the d r a s t i c change i n t h e i n d u s t r i a l s t r u c t u r e o f  the Japanese economy.  (38)  (ii)  T o t a l demand f o r e l e c t r i c 2.8%  compared  m a i n l y by  (iii)  with  the  power i n 2000 has been i n c r e a s e d by previous  the r e l a t i v e l y  for public  use.  The  percentage  share  of  forecast.  This  is  caused  h i g h e r r a t e o f growth o f the demand  electric  power  i n the  total  energy  demand w i l l i n c r e a s e g r a d u a l l y .  (iv)  The peak l o a d demand w i l l i n c r e a s e f o r the f o l l o w i n g  (a)  P o p u l a r i z a t i o n o f home a i r c o n d i t i o n e r s .  (b)  Demand by  (c)  t h a t need continuous o p e r a t i o n w i l l  decrease.  (For example:  Demand  industries  by  increase  2.  industries  reasons:  aluminum s m e l t e r i n g ) .  that  ( f o r example:  operate  in  the  daytime  will  machinery m a n u f a c t u r i n g ) .  Supply o f " E l e c t r i c " P o w e r  (i)  Nuclear of  (ii)  power g e n e r a t i o n w i l l be developed  as the main  source  e l e c t r i c power.  Coal-fired  and  LNG-fired  electric  power  generation w i l l  ranked next t o n u c l e a r e l e c t r i c power g e n e r a t i o n .  (39)  be  (iii)  Oil-fired  electric  power  plants  will  not  be  constructed  in  principal.  3.  F u e l Consumption  F o r e c a s t o f annual Japanese f u e l  consumption i s as f o l l o w s :  1980  Coal  (10  3  tons)  9,780  42,000  LNG  (10  3  tons)  13,440  31,500  LPG  (10  3  tons)  740  2,200  Oil  (10  3  litres)  5,250  3,900  There appears t o be coal  from  the of  growth.  These  estimates  nuclear As  are  c o a l exports in  States  electricity  consumption. estimates  continuing strong i n d i c a t i o n s of  United  estimates  increasing  1990  West  Coast.  The  powered  indicated  reflect  the  electric in  earlier  West Coast  and  are  sections The  of  based  general  o b j e c t i v e s of  generation  s u b j e c t t o s u b s t a n t i a l change. from the U.S.  forecasts  demand, cement p r o d u c t i o n , also  demand f o r steaming  and  on  economic  substantially reducing  this  paper,  sensitivity  i s very high i n r e l a t i o n  oil these  o f proposed to changes  economic growth r a t e s , n u c l e a r developments, o i l supply r e d u c t i o n s , o r  electricity these  demand r e d u c t i o n s .  (See T a b l e  items.)  (40)  2.5  for sensitivity  of coal to  This  volatility  considering All  other  basically  the  demand  with  the  sunk c o s t s  most o p t i m i s t i c P a c i f i c  the  point  export  coal  commitments than and  view o f (1982  will  a port  to  need  a major U.S.  logistics  Rim  be  are  export  Rim  groups  terminal. dealing  prepared to  demand f o r U.S.  accept  coal.  From  range  of  o f some minimum guaranteed  countries  i s required. by  forecast reports  better  These  evidence  from v a r i o u s  U.S.  sources.  COMPARISON"OF'PRICE"COMPONENTS,~PRICING"PHILOSOPHIES, PRICING"OF THE"MAJOR"PACIFIC"RIM"SUPPLIERS.  1.  those  steam c o a l are  s u b s t a n t i a l l y supported  currently a v a i l a b l e i n published foreign  of  establishment  these P a c i f i c  to  for  term and  estimates  to  West Coast  system  short  important  development program c o s t i n g i n the  d o l l a r s ) , the  quantity  particularly  f o r the  the  of  is  development o f  components o f  $250 m i l l i o n  C.  of  AND  Coal"Cost"Components  The  major d e t e r m i n a n t s o f the p r i c e o f a ton o f c o a l are as  (i)  Mining  costs  overburden,  regarding seam  geologic  thickness,  conditions,  presence  of  i.e.  water,  follows:  depth  open  pit  of or  underground m i n i n g .  (ii)  Technology  employed  at  the  mine,  i . e . short  p i l l a r , c o n t i n u o u s o r l o n g w a l l m i n i n g methods.  (iii)  C a p a c i t y o f the mine and  economies o f s c a l e .  (41)  wall,  room  and  (iv)  Labour p r o d u c t i v i t y .  (v)  Age  (vi)  Wage l e v e l s o f l o c a l workers.  (vii)  Q u a l i t y o f the c o a l .  o f the mine and  ( v i i i ) Loading  equipment  c a p i t a l intensiveness of  at  the  mine,  i.e.  operation.  capable  of  loading  a  complete u n i t t r a i n .  (ix)  Inland  transportation  system,  distance,  grade,  residential  sections, etc.  (x)  Terminal  handling  facility,  i . e . size  of  facility,  storage,  s h i p s i z e c a p a b i l i t y , l o a d i n g speed e t c .  (xi)  Ocean s h i p p i n g  distance.  (xii)  Unloading technology.  ( x i i i ) A d d i t i o n a l marine o r i n l a n d t r a n s p o r t t o i n v e n t o r y l o c a t i o n .  (xiv)  C a r r y i n g costs of  inventory.  (xv)  W i l l i n g n e s s o f buyers t o pay  (42)  the p r i c e .  In  the  Pacific  caused  by  strikes  generally  assumed  contract normal  price return  willing level  Rim  to  of  is to  covered.  The  the  or  political  to  approximate  assumed  coal to  rate  mine owner a c c e p t s not  markets,  to  capital.  sell  return  export  c a s e , the  on  a  capital  (excepting  f a c t o r s ) , the perfect  represent  coal  the  cost  premise,  the  long  term  contract  basis  achieved  f o r e s c a l a t i n g costs of  rise  long  production owner  where an operating  a l s o be  term  plus would  costs  r e l a t e d to  in  the  ground  in  order  to  achieve  be  were the  If this  is  should  r a t e o f i n t e r e s t , the  p r o d u c e r i n k e e p i n g w i t h h i s p r o f i t maximizing c r i t e r i o n , would l e a v e resource  a  risks  Resources i n d i c a t e s t h a t  f a s t e r than the  is  acceptable  beyond h i s c o n t r o l .  Exhaustible  the market p r i c e o f a r e s o u r c e  industry  The  mine  after his  return w i l l  aberrations  mining  of  this  was  term  competition.  On  of required  Theory  short  higher  return  at  a  the  later  period.45  The  price  of  substantially country  of  coal by  imported  costs  origin.  delivered  supply costs cost  coal  countries involves  modes  of  For  the  United  West  and  i t will  To  have  as  a  ship.  these a  States  be  other  competitive  costs  at  critical To  Coast,  modes  material  a minimum.  to  extent  efficiently  e f f e c t on  coal.  (43)  that  the  impacted  To  a  of  the  this  is  of  represent  60%  of  i t i s important  i n t e r f a c e between  the  is  regardless  t r a n s p o r t a t i o n system c o s t s can  price.  rail  cargoes,  countries  system  keep t r a n s p o r t  allow  Rim  transportation  port  to  Pacific  the  the  designed  the  of  p a r t i c u l a r concern as the the  by  that  the  a c h i e v e minimum the  port  two  higher  terminal  discharge/load  delivered  price  of  is the the  2.  PRICING"PHILOSOPHIES"OF 'THE"MAJOR"SUPPLIERS.  There a r e a number o f approaches taken t o the p r i c i n g o f steam c o a l i n t h e Pacific long  Rim market.  run c o n t r a c t  market p r e s e n t l y  These can be d i v i d e d  deliveries.  experienced  into categories  In the s h o r t  fluctuate  incremental  considerably  coal  can a l s o  selling  i n this  and demand.  market.  mined tonnage s o l d a t a h i g h e r  emergency need  run, t y p i f i e d  The  the product  effort  to dispose  buyers  would  acquire  low v a l u e d  be  sale of inventory  a t a p r i c e which  o f the i n v e n t o r y ) . taking  spot  advantage  coal  The p r i c e s t e n d delivered  can be  than market p r i c e t o cover some  ( e . g . caused by problems i n other represent  by t h e  on the U.S. West Coast, t h e p r i c i n g i s made  a t t h e e q u i l i b r i u m p o i n t o f s h o r t term supply to  o f s h o r t and  countries).  a t lower than f u l l  covers  only  In such  o f an  supply  variable  a case  opportunity  The  cost ( i . e . costs  the Far  i n an Eastern  i n the system  to  product.  The  l o n g run supply u s u a l l y i n v o l v e s l o n g term c o n t r a c t s and i s p r e d i c a t e d  on  a  much  more  stable  exchange  of  the  product.  According  t o the  I n t e r a g e n c y C o a l E x p o r t Task F o r c e the p r i c e o f c o a l i n t h i s s i t u a t i o n can be  fixed  market  through  price. ^ 4  either The  a guaranteed  guaranteed  what has been d e s c r i b e d  earlier  rate  cost  present contract  of operation  plus  of return  of return  i n the t h e o r y  mine owner would be p r e p a r e d t o s e l l his  rate  level  (44)  depletion.  The  the p r o d u c t a t a p r i c e which c o v e r s  a return  e s t a b l i s h a base  o r a t world  situation i s similar to  of resource  to h i s invested  r a t e o f i n t e r e s t i n t h e c a p i t a l markets. would  basis  price.  capital  above t h e  To a c h i e v e t h i s r e t u r n a Escalation  clauses  would  cover  the  cost  component  increases  p r o d u c e r f o r a p a r t i c u l a r l e v e l of  basis  the  risk  acceptable  to  the  return.  A w o r l d market p r i c e c o n t r a c t i n v o l v e s an agreement between the p a r t i e s t o consider  the  range o f  periodic basis reach  an  period  published for  an  (e.g. a n n u a l l y ,  agreement  within  a  data  for  the  range o f  various  the  It  They w i l l  throughput  guidelines. p r i c e of  is  the  left  to  that is  no  (a good p r o j e c t between  ranges.  ultimate  for  there  negotiations  acceptable  p r o d u c e r i f the  coal  some  attempt  commitment  Presently  steam  to  s u p p l i e r s on  This  the  can  u s e r s want t o  be  include  the range the p r i c e s o f a p a r t i c u l a r s u p p l i e r (e.g. South A f r i c a ) which  may  be  selling  competing ( i . e . o f the market. "evergreen" reach  excess  inventory  in  that  they the  can  the  project  guaranteed  producers  approximate however,  and  the  A  be  cancelled  little  a  term to  number o f  the  of  downturn  in  the  that  return  for  continued  examples o f  Agency C o a l E x p o r t Task F o r c e as  gives  there  are  be  usually  unable  developer will  non-  volatility  p a r t i e s are the  a  of  a  a  to new  continued  project.  They f i n d price  i f the  This  comfort  o f the  rate  buyers.  long  impediments  mechanism.  r e s u l t of  T h i s demonstrates a g a i n  p r i c e range.  f i n a n c i a l r e t u r n f o r the l i f e  both  a  A d d i t i o n a l l y t h e s e world p r i c e type c o n t r a c t s  transport  appears  as  European) market.  agreement on  mine o r  It  of  world  resolve  e x t r e m e l y dangerous t o any in  price  the  to  by  semi-annually e t c . ) .  service).  parties  offered  established  concerning  information  contracting  p r i c e s being  p r i c i n g system i s p r e f e r r e d  some s t a b i l i t y this use  these  follows: ^ 4  (45)  energy and  i n the  source.  ultimate  ability There  success  have been noted  by  of  the  by to  are, this Inter  (i)  Australian boards based  (ii)  producers  which  have  are  a  regulated  strong  by  the  i n f l u e n c e on  government  the  selling  coal price  on t h e i r p e r c e p t i o n o f a P a c i f i c Rim market p r i c e .  Although  coal  there  exists  within  the  sales  from  Canada  a possibility purview  of  are  currently  that this  the  federal  energy  unregulated,  source w i l l  authorities  as  does  of  producers  fall the  e x p o r t o f o i l and n a t u r a l gas.  (iii)  South sell  The  United  return  type  Africa  currently  has  a policy  forcing  a t a government e s t i m a t e d world market p r i c e t o p r e c l u d e  r u i n o u s inter-company  competition.  States  one  appears  contract w i l l  to  be  continue  area  t o be  where  used.  the  guaranteed  This  fragmented  the  current P a c i f i c  and  Canada.  Rim  and  transport sector i s a  steam c o a l t r a d e p a r t i c u l a r  feature of  t o the U n i t e d S t a t e s  supply  Japanese the  electric  utility  As  an  Canada, t h i s  producing  c o a l i s c h a r a c t e r i z e d by a number o f v e r y l a r g e t r a d e r s i n both the countries.  and  the  energy  purchase  the U.S.  of  of  for  and  Excepting  supply  rate  This i s a r e s u l t  c u r r e n t fragmented market which d i f f e r s s i g n i f i c a n t l y from o t h e r countries.  to  example  industries  have  on  new  the  formed  market  purchasing a  joint  side,  venture  the  called  Japanese C o a l Development C o r p o r a t i o n (JDCD) which i s r e s p o n s i b l e f o r  the f o l l o w i n g i t e m s :  (i)  Purchasing  50%  of  the  required  p u r c h a s i n g agency.  (46)  steam  coal  as  a  central  (ii)  Investigating  (iii)  investment  transport,  port  facilitate  the  continued  electric utility  industry.  Overseeing  opportunities  facilities,  the l o g i s t i c s  and supply  system  ocean of  in  mines,  transport coal  i n terms  to  land  which  the  will  Japanese  of deliveries  and  i n v e n t o r y s i z e s o f steaming c o a l .  JCDC has d e s i g n a t e d one major t r a d i n g  company t o l o o k a f t e r t h e Canadian  and U.S. market; a n o t h e r t o l o o k a f t e r the A u s t r a l i a n market; and another to  look a f t e r  the South A f r i c a n market.  have one major government  Taiwan and Korea p r e s e n t l y each  owned e l e c t r i c power c o r p o r a t i o n which c o n t r o l s  a l l p u r c h a s i n g o f steam c o a l f o r e l e c t r i c i t y g e n e r a t i o n p u r p o s e s . appears t h a t for  i n Taiwan and Korea, one major cement company w i l l  the o t h e r s  as a c e n t r a l  I t also also act  p u r c h a s i n g agency f o r the purchase o f steam  coal.  The  number  Pacific  of participants  Rim  market  involved  i s very  i n the s u p p l y  small.  Australia  o f steam has  five  coal or  t o the  s i x coal  e x p o r t i n g companies o f major s i g n i f i c a n c e , South A f r i c a has s i x o r seven, Canada  has a p p r o x i m a t e l y  five  China  will  likely  have  steam  coal  market  i n the P a c i f i c  facing number this  a  large  buyers  only  o f which  except  one.  supply  are presently  According  States  (47)  The  pricing  by l a r g e  trade. ^ 4  i n t h e U.S. market w i l l  source.  dominant  and  t o t h e ICE Task F o r c e t h e  Rim i s c h a r a c t e r i z e d  i n the U n i t e d  o f p r o d u c e r s and s e l l e r s fragmented  two  will  This  sellers large  c o n t i n u e t o make be  based  on t h e  policies  o f each  capital  producer  return.-  This  related  type  of  t o accommodate  over t h e next twenty  Discussion  represents  and  required  flexibility  which a r e l o o k i n g t o the U.S.  approximately  years.  of production  diversity  s e c u r i t y t o t h e P a c i f i c Rim n a t i o n s States  to costs  15-20% o f t h e i r  steam  and  Western  coal  imports  4 9  i n t h i s s e c t i o n has r e l a t e d p r i m a r i l y t o t h e F.O.B. mine p r i c e  and  the c o n t r a c t i n g  r e l a t i o n s h i p between the producer and u l t i m a t e  The  mine mouth p r i c e g r e a t l y a f f e c t s t h e m a r k e t a b i l i t y  However, t h e e f f e c t s o f t h e t r a n s p o r t a t i o n p r i c e can be t h e d e c i d i n g  f a c t o r regarding  costs  user.  o f t h e steam c o a l .  on the f i n a l  delivered  a p a r t i c u l a r mine's a b i l i t y t o  compete i n the market.  3.  PRICES"OF"STEAM'COAL'IN'THE'PACIFIC RIM MARKET  There  are s i g n i f i c a n t differences  Pacific be  Rim c o u n t r i e s  examined  presently  t o give  exist  i n the d e l i v e r e d  depending on c o u n t r y o f o r i g i n . a better  and  how  understanding  these  system.  Table  1981  originating  indicates  C  from Canada, t h e U n i t e d  China.  The p r i c e s  average  price.  inland  the  transport,  have  Table  a $12.71  &  relate  price  States,  and ocean  (48)  i n the  These p r i c e s  to  o f steam  will that  the i n d i v i d u a l  coal  i n Japan  South A f r i c a , A u s t r a l i a , and  p e r M/T maximum  2.15 i n d i c a t e s  terminal,  F  of coal  f o r the d i f f e r e n t i a l s  differences  components i n t h e l o g i s t i c s  2. 14  price  t h e ranges  spread  o r 19% o f t h e  o f F.O.B. mine  costs,  f r e i g h t charges which make up t h e  delivered  coal  charge.  Table  d i s t a n c e s f o r the supply  It  i s reasonable  comparatively greater  which  that  these  export  There c o u l d  ocean  a  be  shipping  price  less  rail  and  shipping  S t a t e s West Coast c o a l would market.  distances  new  U.S.  near  on  the  I t should  be  United  be the  noted,  term p r i c e s i n a market  i n d u s t r y competing w i t h  industries in Australia, pressure  T h i s i s because o f  involved.  i n d i c a t i o n s are  relatively  mining  the  countries.  to expect t h a t the U n i t e d  and  reflects  mature  presents  e x p e n s i v e i n the P a c i f i c Rim  land  however,  2.16  South  States  system t o p r i c e on a b a s i s which a l l o w s the products  Africa  relatively and  Canada.  inland transportation t o compete.  In South  A f r i c a and A u s t r a l i a the r a i l w a y s a r e r e g u l a t e d by the government r e l a t i n g to  a s u p p o r t i v e p o l i c y o f i n c r e a s i n g or a t l e a s t m a i n t a i n i n g  l e v e l of c o a l export  The  ability  potential located export areas  to  such  that  site.  The  compete  a  only  in  areas  terminal  i s Union P a c i f i c  question  i n the U n i t e d  steam c o a l s u p p l y  compunction  off  trade.  market f r a g m e n t a t i o n  product's  rail  in  S t a t e s appears t o be  these  o f Utah and Southern  s e r v i c e to  Railroad.  foreign  To  railroad  California Southern  date the U.P.  pricing  potential  so h i g h of  the  i n the Western  (49)  Long  The  present  likely  R a i l r o a d has export coal  be  from  shown  from  no The  moving  railroad  a r e r e s t r i c t i n g the contracts  the these  coal.  I t appears t h a t the  term  the  geographically  California  from the  s h o r t term t h a t they producers.  will  i s preventing  t h e West Coast i s a h o t l y debated i s s u e .  hampering  markets.  C o l o r a d o are  about e x t r a c t i n g a d d i t i o n a l r e n t s  o f whether the  p r i c e s are  a particular  are  sales being  "discussed" Pacific  not "negotiated"  Railroad  services  i n the p r e s e n t  s o f t c o a l market.  The Union  (and o t h e r s ) have i n d i c a t e d a w i l l i n g n e s s t o p r i c e  f o r long  term c o n t r a c t s  a t a l e v e l which w i l l  allow  their  the c o a l t o  move.  The  development o f t h e Western U.S. e x p o r t  coal  logistics  system  through  Southern C a l i f o r n i a i n v o l v e s many s m a l l and medium s i z e c o a l p r o d u c e r s and a  near-monopoly r a i l r o a d .  major only  export face  terminal  competition  limitations). not  anticipated that  will  a l s o be a pseudo-monopoly  from  smaller  less  efficient  the f i r s t  (it will  ports  with  initially ship  size  In t h i s environment the p o t e n t i a l f o r a systems approach i s  promising.  This  means t h a t  constantly example mine,  p a r t i c i p a n t s i n the c o a l  changing  a Japanese  rail,  differs  from  port,  Conceptually recognize  negotiating trading  and ocean  s a l e s o r purchase programs a r e  practices  house  will  shipping  an agent o r producer  a b i l i t y t o negotiate  that  and t r a n s a c t i o n  negotiate to s e l l sells  b e t t e r r a i l and t e r m i n a l  FOBT b a s i s  have a s i g n i f i c a n t l y h i g h e r  have  indicated  s y s t e m ^ because they can e x e r t 5  components.  a  preference  more l e v e r a g e  with the  This their  process perceived  The F a r E a s t e r n cost.  price. for  buyers  T h i s does n o t The P a c i f i c Rim  the  fragmented  on the i n d i v i d u a l l o g i s t i c  I f i t i s assumed t h a t t h e Western U.S. c o a l l o g i s t i c s  (50)  For  rates.  t h a t a fragmented system w i l l have a h i g h e r  purchasers  terms.  independently  CIF c o a l .  t h i s i s a d i f f i c u l t issue t o analyze.  however mean i t w i l l coal  I t can be f u r t h e r  system  is  as  technically  really  talking  prices  with  and  operationally efficient  about  the  system  logistics  pricing.  components  The  as  i t s competitors  buyers  prefer  individually.  to  This  we  are  negotiate  may  result  s l i g h t l y h i g h e r c o s t s than i f the system were p r i c e d a c c o r d i n g t o l o n g average c o s t but  i t does appear t o g i v e the buyers a sense o f  security.  security  This  from  'system'  unique t o the U n i t e d S t a t e s and w i l l contracts  are  available.  The  price  increases  in run  commercial  appears  to  be  l i k e l y not change even when l o n g term  number o f  producers  and  s a l e s agents  the l e g a l consequences o f c o l l u s i o n / r e s t r a i n t o f t r a d e seem to be  plus  barriers  t o a system development i n the c o a l c h a i n .  The  ability  t o compare p r i c e s o f  measures used by b o t h producers deal  i n short  metric  and  tons.  long With  contaminants  inherent  comparable c o a l p r i c e ton of c o a l equivalent  tons the in  chemical  other  substantial  range  available.  It  is  the  only  The U n i t e d S t a t e s tends t o supplying nations of  heating  effective  deal i n  values  measures  of  a d e l i v e r e d p r i c e b a s i s per B.T.U. o r  (MTCE).  impurities  suppliers.  whereas the  o p e r a t i n g e f f i c i e n c i e s t h a t may other  and  coal,  i s on  d e l i v e r e d c o a l i s hampered by t h e many  Although be gained  these  exclude  difficult  to  locate  this  best type  the  metric  any measurement o f  from a c o a l w i t h l e s s s u l p h u r  i t i s p r e s e n t l y the  and  comparative of  data  for  or  measure a l l the  supplying countries.  D.  FORECAST OF"CHANGES'IN COMPARATIVE"PRICES  Doubts p r e s e n t l y e x i s t  about the  ability  o f the  principal  coal  producing  c o u n t r i e s t o i n c r e a s e the e x p o r t a v a i l a b i l i t y o f steam c o a l f a s t enough t o  (51 )  keep pace w i t h during  the  the  growth o f  next  two  decades.  i n t e n s i f i e d e x p l o r a t i o n and governments. earlier  The  i n the  production  costs  are  very  expanded  It  also  high.  various  is  countries  generated  despite  develop  l e a d times r e q u i r e d  new  to b r i n g  i n f r a s t r u c t u r e are  Additionally,  environmental c o n s t r a i n t s which have t o be  overcome  entering  a  a  number  the  serious  countries  are  and  of  supply  there  long  new  new  threshold  level  of  trade.  appears  countries  However, the  and  s o c i a l , and  to  feeling  Rim  development programs by v a r i o u s i n d u s t r i e s and  chapter).  into  prior  This  Pacific  r e s e r v e base i n most c o u n t r i e s i s adequate (as i n d i c a t e d  mines  political,  import demand i n the  will  requirements  probable  as  substantially, developments  in  become concerned as  Additionally  that  they the  there  as  with  continue  expense will  private  be  of  the  meeting  to  reduce  these  a need  domestic  years  new  ahead,  domestic their  mines and  steam  formation  supplying  coal  dependency  may  energy  on  facilities  for foreign capital  capital  major  oil.  increases  to support not  be  these  adequate  (this situation i s presently occurring in A u s t r a l i a ) .  As  indicated  United  earlier  States  market w i l l their  the  need t o of  d e v e l o p i f the diversity  marketplace p r e s e n t l y  cover  on  their  the  Pacific  Rim  steam  c o a l market  for  i s not r e p r e s e n t a t i v e o f a l o n g term s t a b l e market.  policies  selling  present  has  and  Pacific security  of  many p r o d u c e r s without  spot market below f u l l  short  Rim  term v a r i a b l e c o s t s .  (52)  purchasers are supply. long  Such a  to  pursue  volatile  term c o n t r a c t s  c o s t t o reduce t h e i r This business  The  the  inventory  environment  and and  cannot  continue United  i f there  i s t o be a h e a l t h y western c o a l export b u s i n e s s  States.  throughput demand.  The  contracts The  purchasers to  economic  prevent  life  must these  of capital  consider  signing  cyclical  swings  equipment  i n the  longer  term  i n supply  designated  and  f o r major  p r o j e c t s i n t h i s l o g i s t i c s system i s 20-25 y e a r s .  Although to  the United  States i s presently a t a p r i c e  the o t h e r major s u p p l i e r s o f t h e P a c i f i c  analysts  feel  eventually.  that  this  U.S.  price  disadvantage  Rim c o u n t r i e s , ICF and other  disadvantage  will  be  T h e i r t h i n k i n g i s p r e d i c a t e d upon the "catch-up  predicts  t h a t because o f t h e s u b s t a n t i a l l y h i g h e r  States,  prices  f o r U.S.  coal  (based  compared  on  eliminated  t h e o r y " which  reserves i n the United  costs  of  developing  this  i n c r e m e n t a l supply) w i l l r i s e more s l o w l y than t h e o t h e r supply c o u n t r i e s . The  U.S.  steam  coal  supply  curve  i s less  Canada, South A f r i c a and A u s t r a l i a . ^ 1 in  the  other  expensive will  supply  mining  countries,  sources.  be more expensive  accessible reserves.  than  those i n  As low c o s t r e s o u r c e s a r e d e p l e t e d  they  The e f f o r t s  than  steeply sloped  the U n i t e d  will  be  forced  t o develop  to  these  States e f f o r t s  develop  marginal  t o develop  The U.S. l o n g run supply curve can a l s o be  more areas easily  expected  t o be f l a t t e r than t h a t f o r steam c o a l from o t h e r c o u n t r i e s .  Adding are  t o the f o r e c a s t s f o r improved U.S. c o m p e t i t i o n  several transportation factors.  l a r g e U.S. West Coast  Firstly,  there w i l l  t e r m i n a l s b u i l t which w i l l  allow  deeper  draft  ships  which  (53)  can take  the l o n g run  be a number o f  allow b e t t e r  o f t h e r a i l r o a d and ocean s h i p p i n g s e c t o r equipment. also  over  utilization  These t e r m i n a l s w i l l  advantage o f economies o f  scale  presently  limited  to  the  other  competing  countries.  Secondly,  mentioned e a r l i e r , t h e r e are l a b o u r problems i n A u s t r a l i a and which  could  increase  their  operating  costs  as  South A f r i c a  more q u i c k l y than  the  United  States.  The  present  continue the  market disadvantage e x p e r i e n c e d  throughout the  tables  in  reduce r a i l  the  U.S.  pricing  charges by  s h i p p i n g c o s t s by would  be  life  ton  $7.00-$8.00 per  competitive  term  s e c t i o n , i f the  $2.00 per  at  d i s t i n c t advantages i n the  E.  of a long  by  the U n i t e d  contract.  S t a t e s may  not  Considering  modern p o r t  terminal  again  were  to  due  to o p e r a t i o n a l e f f i c i e n c i e s  and  ton due  to l a r g e r ship c a p a b i l i t i e s ,  the  the  present  time  and  c o u l d p o s s i b l y expect  future.  TERMINAL COST AS A FUNCTION"OF"CIF PRICE  From T a b l e  2. 15 i t can  delivered Africa, small  coal  5.4%  would  and  from  i n the  7.0%  9.1%  appear  in  i n the  to  coal  t e r m i n a l p r i c e as a p e r c e n t a g e o f  make  United  the  logistics  Australia  to  4.1%  States.  terminal  in  Although  function  system, t h i s  South  the  this least  i s certainly  not  To d e f i n e the t e r m i n a l f u n c t i o n i n p e r s p e c t i v e , i t i s n e c e s s a r y  consider  export  seen t h a t the  ranges  Canada,  component  the c a s e .  modes.  price  percentage  important  to  in  be  At  i t as the  interchange  present  terminals  capability.  the  This  at  Los  means  c a r s , shunted t o the  time  the  United  Angeles the  unit  s i d i n g s , and  point  and  of  the  States Long  railroad  West  Beach  t r a i n s must be  Coast  have split  no  and  shipping  primary loop  coal track  into individual  g r a v i t y f e d to s i n g l e c a r r o t a r y dumps.  (54)  These  systems can  thereby  take  twelve  to  fifteen  s u b s t a n t i a l l y decreasing  increasing costs. which w i l l  From the  a l l o w the  the  hours t o u n l o a d  railroad  equipment  one  unit  train  utilization  and  seaborne s i d e they are l o c a t e d a t water depths  l o a d i n g of panamax v e s s e l s o r s l i g h t l y  larger.  With  l o a d i n g r a t e s o f 2,000 t o n s per hour o r l e s s , t h e s e v e s s e l s a r e not  loaded  efficiently.  The  terminal  higher  cost  on  the  than most o t h e r  are  through the overall  equivalent by  of  the  constructing  costs  are  U.S.  federal  on  to  a  new  allow  terminal as  States  (considerably  i n the world) i s i n the  rapid  unit  turnaround  train  facility  p a r t o f the 20  +  year  s c a l e here can  by more than the  c o s t o f the  not  the  at  United  o f a l o o p t r a c k and  l o a d i n g of v e s s e l s i n the  case  the  region  present  f r e i g h t market caused by  in  of  rail  lead  new  equipment  basis  could  be  reduced  terminal.  deep water,  time)  the  the  Additionally  (where  dredging  p r o j e c t r a t h e r than w a i t i n g terminal  for  will  the  allow  120,000-150,000 t o n deadweight range.  again  reduce the  d e l i v e r e d p r i c e of  t o t a l t e r m i n a l throughput charge. time  If  double r o t a r y c a r dump, the  throughput charge o f the  dredging  economies o f  the  the  a dedicated  total  capitalized  efficient The  designed  rate  of  (depending on d i r e c t o r i n d i r e c t d e l i v e r y ) .  e f f i c i e n t use  rail  Coast  coal loading ports  o f $4.00-$6.20 p e r t o n terminals  West  due  to  the  instability  a substantial overcapacity  of  coal  (This i s the  ocean  i n the panamax c l a s s .  In the l o n g run, however, economies o f s c a l e w i l l p r e v a i l i n t h i s market.)  In  perspective,  itself  is  not  a l t h o u g h the high  in  throughput  relation  (55)  to  charge f o r the the  delivered  terminal CIF  function  price,  the  efficiencies  which  f u n c t i o n s can  the  a c t t o reduce the  the t e r m i n a l charge. in  Long  terminal  Beach  is  such  a  incurred  complementary  of  c o a l , they  developers.  in  an  transport  t h e s e c o s t s can  the  d e l i v e r e d p r i c e by  critical  factor  steam c o a l export  system i s e x t r e m e l y c a p i t a l be  in  The  an  and  seaborne  amount g r e a t e r  intensive. effort  to  trade.  promulgating  P a r t o f the improve  or  fabric  not of  contribute  the  U.S.  to  terminal continued  construction  the  an  terminal.  i n the  and  of  the  Although  delivered price  increased  institutional  expenses  efficiencies  modes which i n t e r f a c e a t the  may  the  than  T h i s r e m a i n i n g l i n k i n the  c o n t r i b u t e to an o v e r a l l r e d u c t i o n may  rail  I t i s f o r t h i s r e a s o n t h a t the proposed new  expansion o f the U.S.  may  facilitates  return  regulatory  to  the  system  causes b a r r i e r s such t h a t l o g i s t i c s components are unable t o f u n c t i o n as a true and  system  i n regard  to  the  development and  important l i n k t o the c o a l c h a i n .  examine  the  organizational  development o f an e f f i c i e n t  and  (56)  final  I t i s the purpose o f t h i s t h e s i s t o  institutional  system.  construction of t h i s  boundaries  involved  in  the  END"NOTES  1. Dankwart A. Ruslow and John F. Prospects, C o u n c i l on F o r e i g n R e l a t i o n s , (New P r e s s , 1976), p. 28.  Mugno, York:  2. Richard A. Passman, "Coal as a Major P r o d u c t i o n and T r a n s p o r t a t i o n , Seventh Annual Conference, 1981. p. 94.  OPEC -Success""and New York U n i v e r s i t y  Energy  Source",  Coal  3. U.S. Department o f Energy, (prepared by Z i n d e r - N e r i s I n c . ) , F i n a l D r a f t t o the Interagency C o a l Export Task F o r c e , U ^ S ; " C o a l " E x p o r t s " - " The"Far E a s t , November, 1980. Chapter 1, P a r t VI, S e c t i o n 2, and Chapter 2, P a r t V I . 4. H. P. Drewry ( S h i p p i n g C o n s u l t a n t s ) L i m i t e d , Research D i v i s i o n , The"Growth of"Steam C o a l " T r a d e , "A Review and F o r e c a s t o f I n t e r n a t i o n a l Trade i n Thermal C o a l and S h i p p i n g Requirements: 1980-90", 1980. p. 30. 5. Western Governors P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Report of the Demand Task Group, W e s t e r h C o a l " E x p o r t s " t o the P a c i f i c " B a s i n , 1982, p. 6. 6.  I b i d . , p.  14.  7. U.S. Department o f Energy, (prepared by Z i d e r - N e r i s c i t . , Chapter 1, P a r t V I , S e c t i o n 4, and Chapter 2, S e c t i o n V I . 8.  I b i d . , Chapter 1, P a r t VI, S e c t i o n 2, and  9.  I b i d . , Chapter 1, P a r t VI, S e c t i o n 3 and  Chapter 2, 4, and  Inc.)  op.  Section VI.  Chapter 2,  Section  6. 10. J e f f r e y T. W i l l i a m s , U t a h " a n d " C o l o r a d o " E x p o r t s " t o " t h e " P a c i f i c Rim, Utah Energy O f f i c e , Resource Development and Environment, Utah L e g i s l a t i v e P r i n t i n g O f f i c e , 1981, p. 1.  cit.,  11. U.S. Department s e c t i o n 0.2.15.  of  Energy,  (prepared  by  Zinder-Neris  Inc.),  op.  12. E.P.CD. - E l e c t r i c Power Development Corp., a j o i n t governmentu t i l i t y v e n t u r e which f u n c t i o n s as a w h o l e s a l e s u p p l i e r o f power t o 9 r e g i o n a l u t i l i t y companies. EPDC i s f i n a n c e d 70% by the government, and 30% by the u t i l i t i e s , and w i l l p l a y a major r o l e i n the c o a l - f i r e d p l a n t development i n Japan. 13. JCDC - Japan C o a l Develoment C o r p o r a t i o n , a c o r p o r a t i o n formed by the Independent E l e c t r i c U t i l i t y companies and EPDC. I t s purpose i s t o o r g a n i z e and c o o r d i n a t e the a c q u i s i t i o n and t r a n s p o r t a t i o n o f approximately 50% o f the import steam c o a l r e q u i r e d by the E l e c t r i c U t i l i t y members.  (57)  14. U.S. Department s e c t i o n 0.2.14.  cit.,  o f Energy  (prepared  by Z i n d e r - N e r i s  Inc.),  15. O r g a n i z a t i o n f o r Economic C o - o p e r a t i o n and Development, n a t i o n a l Energy Agency, Steam C o a l " P r o s p e c t s " t o " 2 0 0 0 , 1978, pp. 53-53. 16.  I b i d . , p . 52.  17.  I b i d . , pp. 20-22.  18.  I b i d . , p . 30.  19.  I b i d . , p. 30.  op.  Inter-  20. C. I t o h and Co. L t d . , "Report t o the Long Beach I n t e r n a t i o n a l C o a l P r o j e c t M a r k e t i n g Subcommittee", June 1982. 21. 22. p.  Western Governors P o l i c y O f f i c e , op. c i t . , p. 12. Organization  f o r Economic C o o p e r a t i o n and Development, op. c i t . ,  61.  23. World C o a l Study, C o a l " - - " B r i d g e t o t h e " F u t u r e , C a r r o l l L. W i l s o n , P r o e j c t D i r e c t o r , (Cambridge, Mass.: B a l l i n g e r P u b l i s h i n g Co., 1980), p . 76.  and  24.  I b i d . , P« 77.  25.  I b i d . , P« 81.  26.  I b i d . , P« 78.  27.  I b i d . , P« 81.  28. U.S. Department o f Commerce, FT-990, " H i g h l i g h t s o f U.S. E x p o r t T r a d e " U.S. Trade D i g e s t f o r Calendar Year 1981, p . 72.  Import  29. These c a l c u l a t i o n s use U.S. e x p o r t s i n 1985 and 1990 from the Westpo R e p o r t , op. c i t . , p . 6, and f o r 1995 and 2000 e x p o r t s uses C e n t r a l Puget Sound Economic Development D i s t r i c t , (prepared by C H 2 M - H i l l ) , Puget S o u n d " C o a l " E x p o r t " O p p o r t u n i t i e s " a n d " I s s u e s , E r i k Johnson, E x e c u t i v e D i r e c t o r , 1982, p. 25. 30. Report t o the Long Beach I n t e r n a t i o n a l C o a l P r o j e c t , Subcommittee, made by M e t r o p o l i t a n Stevedore Company, A p r i l , 1982. 31.  Ibid.  32. Report t o the Long Beach I n t e r n a t i o n a l Committee, made by C. I t o h and Company, June, 1982.  cit.,  Marketing  33. U.S. Department o f Energy, s e c t i o n s 1.6.1-1.6.6 and 2.6.1.  (58)  (prepared  Coal  Project,  by Z i n d e r - N e r i s  Executive  Inc.),  op.  34. MTCE - M i l l i o n tons o f c o a l e q u i v a l e n t , a t o n o f c o a l e q u i v a l e n t i s a m e t r i c t o n w i t h a s p e c i f i c h e a t i n g v a l u e o f 12,600 BTU p e r pound. 35. U.S. Department o f Energy, s e c t i o n s 1.6.2-1.6.15.  cit.,  (prepared  by Z i n d e r - N e r i s I n c . ) , op.  36. Ibid., s e c t i o n s 2.6.1-2.6.10. 37.  World C o a l Study, op. c i t . , p . 80.  38.  I b i d . , p . 80.  39.  O r g a n i z a t i o n f o r Economic C o o p e r a t i o n  and Development, o p . c i t . ,  p. 33. 40.  I b i d . , p . 33.  41.  World C o a l Study, op. c i t . , p . 35.  42.  I b i d . , p . 35.  43. U.S. Department o f Energy, (prepared by ICF I n c o r p o r a t e d ) , D r a f t f o r t h e I n t e r a g e n c y C o a l E x p o r t Task F o r c e , The " "Prospects" f o r " World "Coal T r a d e : " " A n " A n a l y s i s a r i d " R e v i e w " o f " t h e " L i t e r a t u r e , August, 1980, pp. 135-138. 44. Report t o the Long Beach I n t e r n a t i o n a l C o a l Committee, made by C. I t o h and Company, June, 1982. 45. Resources: 721.  cit.,  F. M. P e t e r s o n and A. C. F i s h e r , " E x p l o i t a t i o n o f E x t r a c t e d A Survey", The Economic ' J o u r n a l , V o l . 87 (December 1977), pp. 681-  46. U.S. Department o f Energy, s e c t i o n s 0.1.18-0.1.20.  (prepared  by Z i n d e r - N e r i s I n c . ) , op.  47.  I b i d . , s e c t i o n 0.1.21.  48.  I b i d . , s e c t i o n 0.1.16.  49.  Western Governors P o l i c y O f f i c e , op. c i t . , p . 17.  50. Report t o the Long Beach I n t e r n a t i o n a l C o a l I t o h and Company, A p r i l , 1982.  cit.,  P r o j e c t , Executive  51. U.S. Department Chapter 5.  o f Energy,  (59)  (prepared  P r o j e c t , made by C.  by ICF I n c o r p o r a t e d ) , op.  T A B L E S AND  (60)  FIGURES  T a b l e 2.1 PROJECTED GENERATING  CAPACITY  BY FUEL SOURCE, 1980-1990 JAPAN, TAIWAN, KOREA  Country and Fuel  Source  Megawatts  Percent of T o t a l  1980  1990  Change  1980  1990  Change  5,260  29,560  24,300  4.2  12.6  22.3  Nuclear  15,510  50,902  35,410  12.4  21.7  32.4  Oil  59,480  56,330  (3,150)  47.4  24.0  (2.9)  Other  45,110  97,750  52,640  36.0  41.7  48.2  Total  125,360  234,560  109,200  100.0  00.0  980  4,550  3,570  10.7  27.0  46.5  Nuclear  1,272  5,144  3,872  13.9  30.5  50.5  Oil  5,527  4,376  (1,151)  60.3  26.0  (15.0)  Other  1,387  2,772  1,385  15. 1  16.5  18.0  Total  9,166  16,842  7,676  100.0  00.0  Coal  725  5,945  5,220  7.7  26.6  40.4  Nuclear  587  8,917  8,330  6.3  39.9  64.4  Oil  5,787  2,693  (3,094)  61.6  12. 1  (23.9)  Other  2,292  4,770  2,478  24.4  21.4  19.1  Total  9,391  22,325  12,934  100.0  00.0  6,965  40,055  33,090  4.8  14.6  25.5  Nuclear  17,369  64,963  47,594  12. 1  23.7  36.7  Oil  70,794  63,399  (7,395)  49.2  23.2  (5.7)  Other  48,789  105,292  56,503  33.9  38.5  43.5  143,917  273,709  129,792  100.0  00.0  Japan Coal  Taiwan Coal  Korea  Total Coal  Source: Western Governors P o l i c y o f f i c e , Western C o a l E x p o r t s t o t h e P a c i f i c Basin,  1982, p . 270.  Note: "Other" f u e l source i n c l u d e s l i q u e f i e d n a t u r a l gas (LNG), h y d r o e l e c t r i c i t y , and geothermal  (61)  energy.  TABLE 2.2a  Japan:  Volume and Composition  o f TPE, 1980-1985  (Based on GDP Growth o f 5.0 P e r c e n t A n n u a l l y )  T r i l l i o n s o f Btu  1980  1981  1982  1983  1984  1985  16,725  17,419  18,142  18,895  19,679  20,496  Nuclear  786  900  1,030  1, 181  1,353  1,550  Hydro-Geothermal  856  895  936  979  1,024  1,071  Other  716  761  809  859  914  971  2,358  2,556  2,775  3,019  3,291  3,592  Oil  12,740  11,990  12,240  12,490  12,740  12,990  Gas  775  884  1,008  1, 151  1,313  1,498  T o t a l Primary  Energy  Domestic P r o d u c t i o n :  Sub-Totals  Imports:  . Other  72  Imported  Coal  1,852  1,989  2,119  2,235  2,335  Imported  Coal i s the Residual  Source:  U.S. Department o f Energy The Interagency Task F o r c e on U n i t e d S t a t e s C o a l E x p o r t s , 1980, p. 285.  (62)  2,344  TABLE 2.2b  Japan:  Volume and Composition  o f TPE, 1985-1990  (Based on GDP Growth o f 4.0 P e r c e n t  Annually)  T r i l l i o n s of Btu  1985  1986  1987  1988  1989  1990  20,496  21,217  21,964  22,737  23,537  24,366  Nuclear  1,550  1,773  2,029  2,321  2,655  3,038  Hydro-Geothermal  1,071  1,132  1,197  1,265  1,337  1,415  971  1,021  1,075  1, 130  1,189  1,254  3,592  3,926  4,301  4,716  5,181  5,707  12,990  12,910  12,830  12,750  12,670  12,591  Other  1,570  1,761  2,006  2,355  2,847  3,422  C o a l Imports  2,344  2,620  2,827  2,916  2,839  2,646  T o t a l Primary  Energy  Domestic P r o d u c t i o n :  Other  Sub-Totals  Imports: Oil  Imported  Coal i s the Residual  Source:  U.S. Department o f Energy The Interagency Task F o r c e on U n i t e d S t a t e s C o a l E x p o r t s , 1980, p. 260.  (63)  TABLE 2.3  Taiwan:  Volume and Composition  o f TPE, 1980-2000  (Based on GDP Growth o f 4.0 Percent  Annually)  T r i l l i o n s of Btu  1980  1985  1990  2000  Energy  1,138  1,358  1,621  2,309  Domestic P r o d u c t i o n :  200  268  358  641  812  833  673  466  Coal  62  163  452  904  Other  64  94  138  298  T o t a l Primary  Imports: Crude O i l & P r o d u c t s  O i l Imports r e p r e s e n t the R e s i d u a l Source:  U.S. Department o f Energy The Interagency Task Force on U n i t e d S t a t e s C o a l E x p o r t s , 1980, p. 58.  (64)  TABLE  Korea:  2.4  Volume and Composition o f TPE, 1980-2000  (Based on GDP Growth o f 5.0 P e r c e n t A n n u a l l y )  T r i l l i o n s of Btu  1980  1985  1990  2000  Energy  1,353  1,583  1,926  2,850  Domestic P r o d u c t i o n :  502  762  1,089  1,708  823  470  334  263  28  351  503  879  T o t a l Primary  Imports: Petroleum Coal  Source:  & Products  U.S. Department o f Energy The Interagency Task Force on U n i t e d S t a t e s C o a l E x p o r t s , 1980, p. 50.  (65)  TABLE 2.5  Sensitivity Analysis Western U.S.  Coal Exports  1985-2000  M i l l i o n s o f Tons  Alternative Projections  1985  1990  1995  2000  CPSEDD P r o j e c t i o n  10.9  26.6  37.7  51.8  Reduced Power Growth  10.4  23.3  31.4  41. 1  Reduced N u c l e a r Growth (more c o a l growth)  13.0  30.6  43.2  59. 1  I n c r e a s e d Market Share f o r Western U.S. C o a l  12.3  36.5  53.3  73.3  11.8  31.5  43.5  57.0  Reduced Power Growth and I n c r e a s e d Market Share  Source:  CH2M H i l l P r o j e c t i o n s , i n Puget Sound C o a l O p p o r t u n i t i e s and I s s u e s , 1982, p. 72.  (66)  Export  TABLE 2.6 Cost E s t i m a t e s f o r E l e c t r i c i t y G e n e r a t i o n i n New Baseload N u c l e a r , O i l and C o a l - F i r e d Power S t a t i o n s 1976 D o l l a r s ; Average Cost per KWH  f o r 1st 20 y e a r s O p e r a t i o n f o r P l a n t s Commissioning  Nuclear  Fuel O i l Sulphur H i g h Sulphur HFO HFO Conventional 100% FGD Low  Avg. Cost per KWH f o r 20 y e a r s ( $ m i l l s )  PWR "2 x 1100 mw  C a p i t a l Cost O p e r a t i o n and Maintenance Fuel  T o t a l Avg. Cost per KWH  a t 5500 7000 6000 5000 4000 3000  h/a h/a h/a h/a h/a h/a  C o s t o f C o n s t r u c t i o n $/KW  i n 1986  Bituminous C o a l Without 100% 50% FGD FGD FGD  14.9 2.4 6.5  7.5 2.0 31.0  9.6 4.2 29.0  9.6 2.2 10.8  12.4 5. 1 11.3  11.0 3.6 11.1  23.8 20.7 22.6 25.3 29.5 36.3  40.5 38.9 39.9 41.2 43.3 46.7  .42.8 40.8 42.0 43.8 46.4 50.8  22.6 20.6 21.8 23.6 26.2 30.6  28.8 26. 1 27.8 30.0 33.4 39. 1  25.7 23.3 24.8 26.8 29.8 34.9  $700  $350  $450  $450  $580  $515  Avg F u e l Cost f o r 1986-2006 $ p e r Toe ( 1 0 k c a l ) $ p e r 1 0 Btu  $25.79 $ 0.65  $132 $3.33  $118 $2.97  $45 $1.13  $45 $1.13  $45 $1.13  Heat Rate Btu/Kwh Kcal/Kwh  10,000 2,620  9,325 2,350  9,715 2,445  9,500 2,395  9,880 2,490  9,690 2,440  7  6  Source:  I n t e r n a t i o n a l Energy Agency  Steam C o a l P r o s p e c t s t o 2000, 1978, p . 112.  TABLE 2.7  PACIFIC  RIM ELECTRIC POWER INDUSTRY  COAL IMPORT FORECAST, 1985-2000  M i l l i o n s of Tons Country  1981  1985  1990  1995  2000  3.8  12.0 2.5 14.5  27.0 19.0 46.0  27.0 37.7 64.7  27.7 48.7 76.4  2.3  9.8 0 9.8  12.4 7.6 20.0  12.4 17.9 30.3  12.4 46.0 58.4  1.7  7. 1 0 7. 1  7.5 3.3 10.8  7.5 9. 1 16.6  7.5 12.8 20.3  0  6.3  15.3  26.9  39.5  6. 1  37.7  92.1  138.5  194.5  Japan Firm P l a n n i n g Stage Total  Taiwan Firm P l a n n i n g Stage Total  Korea Firm P l a n n i n g Stage Total  Other  T o t a l P a c i f i c Rim  Source:  Westpo, 1982, f o r 1981, 1985, and 1990, p . 264. CH2M HILL, 1982 f o r 1995 and 2000, p . 70.  Note:  "Firm" means p l a n t s c u r r e n t l y i n o p e r a t i o n , c o n v e r s i o n s under c o n s t r u c t i o n o r planned, and new p l a n t s under c o n s t r u c t i o n . " P l a n n i n g Stage" means new p l a n t s t h a t a r e n o t a s y e t under construction.  (68)  TABLE  Source:  o  U.S. U.S.  - »  Lianite A  M i n e r a l s Yearbook, M e t a l s , M i n e r a l and F u e l s . Department o f t h e I n t e r i o r , 1961, p . 185.  Ol  o o Li anite B  2:8  o  —•  ca  O o  o  ro  tz  o  -I  n O  A'  o  O O  O  O  o  o  3  O  o  O o  O o  o o o  o o o  O —i o c: o  Lianite A  Subbi tuminous C v  Subbituminous C  Suboituminous f\  E  r_ H i g h - v o l a t i l e C | bituminous i  4_  M i a h - v o l a t i l e S bituminous<  H i a h - v o l a t i l e C bituminous! s  H i a h - v o l a t i l e 3 bituminous h \tW I  i  I'll  H i a h - v o l a J i l e A Bituminous  M e d i u n - V c l a t i l e bituminous T  Medi edium-volatile  bituminous  M R P * :  V \  L o w - v o l a t i l e bituminous  i  Low-volatile  bituminous  \  /  Sen- i a r t h r a c i t e  >wmm A n t h r _ c i te  (69)  1 1 1  TABLE 2.9  WORLD TECHNICALLY AND ECONOMICALLY RECOVERABLE COAL RESERVES  mtce International Energy Agency 1976  Country  United States  WOCOL 1980  D.O.E. CETF 1980/81  177,000  166,950  166,950  99,000  98,883  98,883  110,000  109,900  109,900  U n i t e d Kingdom  45,000  45,000  India  33,000  12,427  South A f r i c a  27,000  . 43,000  Germany  35,000  34,419  Poland  21,000  59,600  59,600  Australia  27,000  32,800  60,050  Canada  10,000  4,242  49,945  Others  53,000  55,711  172,105  Totals  637,000  662,932  766,593  China U.S.S.R.  mtce  —  Source:  .  53,160  one m i l l i o n m e t r i c tons o f c o a l e q u i v a l e n t d e f i n e d as h a v i n g 12,600 B t u p e r pound. I n t e r n a t i o n a l Energy Agency 1978, p . 175. Report o f t h e World C o a l Study 1980, p . 48. Department o f Energy p. 250.  Steam C o a l P r o s p e c t s t o 2000,  Coal-Bridge t o the Future,  C o a l E x p o r t Task F o r c e Report, 1980,  (70)  TABLE 2.10  MARKET SHARE OF STEAM COAL TRADE IN THE PACIFIC RIM  USA  South Africa  Australia  China  Canada  All others  Japan 1985  15  30  20  15  10  10  1990  15  30  20  15  10  10  2000  25  25  10  12  12  16  50  50  50  50  50  50  -  -  -  -  -  South Korea 1985 1990 2000  -  Taiwan 1985  20  60  1990  20  60  2000  20  60  Source:  20 20 20  -  U.S. Department o f Energy, I n t e r i m Report o f t h e I n t e r a g e n c y C o a l E x p o r t Task F o r c e , 1980, p . 32.  (71)  TABLE 2.11  COAL RESERVES IN THE 5 PRINCIPAL WESTERN PRODUCING STATES  M i l l i o n s of S h o r t Tons  State  Bituminous  Colorado  Sub-Bituminous  Lignite  Anthracite  Total  62,203  18,492  2,363  132,151  New Mexico  10,948  50,801  Utah  28,222  156  —  28,378  Wyoming  13,235  108,319  —  121,554  116,971  309,919  96  515,519  Montana  Totals  Source:  90  87,533  222,047  —  6  87,533  81,785  61,755  U.S. G e o l o g i c a l Survey B u l l e t i n 1136 C o a l Reserves o f t h e U n i t e d S t a t e s -- A P r o g r e s s Report January 1, 1960, p . 90.  (72)  TABLE  Source:  Department o f the I n t e r i o r ,  2.12  Energy P e r s p e c t i v e s 2, June 1976, p .  104.  TABLE 2.13 COMPARISON OF THERMAL COAL DEMAND FOR JAPAN, TAIWAN, AND KOREA  Report I.E.A. 1978 mtce  WOCOL 1980 mtce  D.O.E. CETF 1980 mmt  WESTPO 1981 mmt  MITI/C. ITOH 1982 mmt  9.4  17.9  15.1  Japan 1981  —  —  1985  13.7  6.0  27.5  34.0  32.0  1990  33. 1  —  62.7  63-69  61.3  2000  76.5  53.0  90-107.8  107.6*  —  Taiwan 1981  —  —  1985  —  7.0  3.5  10.6-14  9.0  1990  —  12.0  15.8  18.1-27  12.5  2000  —  54-65  37.7  69.0  1981  —  —  0.5  1.7  1985  —  14.0  8.7  13.1-14.8  8.3  1990  —  30.0  15.8  18.6-20.3  13.0  2000  —  69-88  46. 1  4.7  4.5  —  Korea  38.2*  3.7  —  * CH2M HILL 1982 p r o j e c t i o n s mtce: mmt:  m e t r i c t o n c o a l e q u i v a l e n t a t 12,600 B t u / l b . m i l l i o n m e t r i c tons  Sources:  I.E.A. Steam C o a l P r o s p e c t s t o 2000, M.I.T. WOCOL Report, p . 70. D.O.E. Interagency Task F o r c e on C o a l E x p o r t s , WESTPO Report, Japan M i n i s t r y o f I n t e r n a t i o n a l Trade and I n d u s t r y and C. I t o h Report o f A p r i l 1982  (74)  TABLE 2.14  STEAM COAL IMPORT PRICES TO JAPAN DURING 1981  Source  United  Tonnage Share  States  C&F Average P r i c e  18.20%  $ 74.50  10.21%  $ 68.00  U.S.S.R.  2.19%  $ 62.87  Canada  9.79%  $ 61.79  South A f r i c a  10.85%  $ 67.82  Australia  48.76%  $ 69.01  China  Source:  C. I t o h & Co. Report o f June 24, 1982  (75)  ($) U.S.  TABLE 2.15  RANGE OF COAL COST COMPONENTS FROM VARIOUS SUPPLIERS TO JAPAN (1980 U.S. ($) PER TONNE)  •Western U.S.  Queensland  F.O.B. Mine  $19.00-23.00  $23.00-28.00  Rail  $19.00-23.00  Port  Ocean  Handling  Shipping  Demurrage  T o t a l D e l i v e r e d Cost  $5.00-6.15  New So. Wales  $21.00-26.00  $18.00-26.00  $5.00-10.00  $4.50-9.00  $13.00  $3.00-4.00  $3.00-4.00  $2.00-3.00  $15.70  $8.40-12.15  $13.95  -  -  $3.00-8.00  $58.70-67.85  W. Canada  $39.40-54.15  $45.45-60.95  S. A f r i c a  $14.00-22.00  $6.00  $1.00-2.00  $9.15-13.15  $11.80-18.30  -  -  $42.15-55.15  $32.80-48.30  *1982 U.S.$ per s h o r t t o n  Sources:  1.  Western C o a l Routes t o Long Beach and P o r t l a n d , B e c h t e l r e p o r t o f March 1982.  2.  W. G. Waters I I " T r a n s p o r t a t i o n and Market P r o s p e c t s i n World C o a l Trade", a t the Canadian T r a n s p o r t Research Forum, M o n t r e a l , P.Q., May 26, 1982.  Presentation  TABLE 2.16  COMPARISON OF RAIL AND"OCEAN SHIPPING DISTANCES FOR PACIFIC" RIM SUPPLY COUNTRIE S  SHIP ( t o Japan)  RAIL Representative distance t o Port (miles)  Australia Queensland 1 Queensland 2 New South Wales Western A u s t r a l i a South A u s t r a l i a Tasmania  4065 4065 4270 4270 4800  120 220 250 100 500 100  Canada N o r t h e a s t e r n B.C. ) S o u t h e a s t e r n B.C. ) Alberta Mountains/Foothills) Alberta Plains )  4265  700-760 680-730 680-750 800-850  7800  740 292 204 436  5400  1200-1750 800-1350 700-1000 800-1600 1200-1650  South A f r i c a Northern Transvaal Southern T r a n s v a l l Natal Orange F r e e S t a t e  ) ) ) )  United"States Colorado Utah New Mexico Montana Wyoming  Sources:  ) ) ) ) )  1.  D.O.E. Interagency Task F o r c e on U.S. C o a l E x p o r t s , Utah Energy O f f i c e , Utah and C o l o r a d o C o a l E x p o r t s t o t h e P a c i f i c Rim, 1980, p . 34.  2.  H. P. Drewry ( S h i p p i n g C o n s u l t a n t s L t d . ) The Growth o f Steam C o a l Trade, 1980, p . 60.  (77)  CHAPTER 3  POTENTIAL IK "S;"WEST"COAST"TERMINAL"LOCATIONS  PART I " - POTENTIAL"TERMINAL"SITES  INTRODUCTION  Westpo and o t h e r United  States w i l l  18.7-25.5  million  facilitate  a  which  achieving foot of  U.S.  will  tonnages, years  tons  i n 1990,  Coal  and  facility  later  must be  i s capable  of:  system.  harbour  tons.  of  1980/81 almost  constructed  tons  critical  Although  more  t h e next  handling  per hour;  To  1  must be  component i n  than  t o accommodate  within  (a) e f f i c i e n t l y  every  has  developing every  i n 2000.  one  the l a r g e r  three  unit  port  to four  trains;  (b)  (c) accommodating 60 storage  capability  2  and Washington,  commissioners  possibility  tons  ocean v e s s e l s ; and (d) p r o v i d i n g a minimum  700,000 m e t r i c  Oregon  the f i n a l  i n the century  W i t h t h e economies o f t h e U.S. West Coast in  million  t r a d e , a major p o r t f a c i l i t y  a l o a d i n g r a t e o f 6-10,000  draft  45-55  represents  logistics  be needed  of the  8.5-10.8 m i l l i o n tons o f steaming c o a l i n 1985,  Such a f a c i l i t y  Western  facility  export  t h e development o f t h i s  constructed. the  r e c e n t r e p o r t s have p r o j e c t e d t h a t t h e West Coast  port  been a  new  conceivable  planning  under port  bulk  (78)  States slowing  commission  pressure  facility  down, e s p e c i a l l y  to  and  board  investigate  i n their  area.  l o a d i n g l o c a t i o n on t h e West  of the  During Coast  had  a  feasibility  or  impact  study  i d e n t i f i e d 26 s i t e s i n the f o l l o w i n g  i n progress. areas:  The  Westpo  report  3  7 s i t e s i n Puget Sound 6 s i t e s a l o n g t h e Columbia  River  2 s i t e s on t h e West c o a s t o f Oregon and Washington 7 s i t e s i n t h e San F r a n c i s c o  Bay a r e a  3 s i t e s i n Southern C a l i f o r n i a 1 site  i n Alaska  Other s t u d i e s have i n d i c a t e d as many as 30 l o c a t i o n s i n v e s t i g a t i n g a c o a l port  opportunity  (see F i g u r e  3.1  f o r West  Coast  map  and  terminal  locations.)  The  World C o a l Study i n d i c a t e d t h a t "the steam c o a l t r a d e w i t h t h e P a c i f i c  Rim  i s a t l e a s t as much a t r a n s p o r t a t i o n b u s i n e s s as i t i s a c o a l m i n i n g  business". the  U.  Chapter 2 s t a t e d t h a t t h e g r e a t e s t  4  S.  steam  coal  more  competitive  l e v e r a g e a v a i l a b l e t o make  i n the P a c i f i c  c o m p l e t i o n o f an e f f i c i e n t l a r g e s c a l e p o r t f a c i l i t y . o f t h i s type o f p o r t o f t h e steam c o a l  If  the United  number  on the West c o a s t  States  the lack  i s c e r t a i n t o c o n s t r a i n the growth  supply market was n o t c h a r a c t e r i z e d a system  could  based on a l o c a t i o n which minimized t h e d e l i v e r e d of  Presently,  i n the  trade.  o f mine owners and t r a d e r s ,  constraints  Rim l i e s  ship  size  limitations,  (79)  rail  by such a l a r g e  p o s s i b l y be developed  c o s t s o f c o a l g i v e n the distances  and,  most  importantly,  origin  of the  coal.  There are c u r r e n t l y no  l o n g term steam  c o a l c o n t r a c t u a l commitments from the P a c i f i c Rim p u r c h a s e r s . some  question  near/medium locations port  as  term  to  planning  the  mine  satisfy and  port planning  To  to  owner,  a  that  locations  development p r o c e s s  groups railroad,  terminal  business  trade  not  will  materialize.  identified  and  With  new  mine  and  continues  to  support  the  multiple  efforts.  p a r t i c i p a n t s may coal  supply  of  l o n g term commitments postponed, i t c o m p l i c a t e s  f u r t h e r complicate  development  level  T h i s causes  not  but  this  have  a  or  a  membership port  for  to  use  their  the  which  the  primary  candidate  includes  operator.  necessarily relate  rather  interests  i s s u e , each o f  The  West Coast  either  a  objectives  port  resource of  these  t o b e i n g p a r t of a p r o f i t making  port  as  business  a  v e h i c l e to  lines.  By  promote  the  ensuring  the  f i r s t p o r t development i s e i t h e r near a p a r t i c i p a n t mine l o c a t i o n , o r on a participant purchase not  it  railroad  criteria is  the  line,  the  according  optimal  Pacific  to  port  the  Rim  buyers w i l l  established port  site.  This  be  forced to  location  situation  could  set  whether nullify  or any  p r o s p e c t of a 'systems approach' t o the most f a v o r a b l e p o r t l o c a t i o n .  The  p r e c e d i n g paragraph  other port  logistics facility  system  i s not meant t o d i m i n i s h the importance t h a t these participants  developments.  take  Without  an this  a g g r e s s i v e p o r t harbour commissioners and little the  interest  present  generated  time,  does  active  interest  support,  represent  (80)  with  e x e c u t i v e s , t h e r e would be  i n an e x p o r t c o a l t e r m i n a l . not  along  i n the  a  financially  new very very  Such a p r o j e c t , a t sound  investment  without  t h e e x i s t e n c e o f l o n g term  c o n t r a c t s c o v e r i n g some minimum  break  even p o s i t i o n .  Levels  of  thermal  coal  increase s u b s t a n t i a l l y .  exports  from  the West  Coast  are  expected  to  I t i s obvious t h a t the p r e s e n t p o r t f a c i l i t i e s on  the U. S.  West Coast a r e i n c a p a b l e o f p r o c e s s i n g such throughput  levels.  They  unable  operations  of  they  adequate  are  interfacing storage  rail  to  allow  neither  and  ocean  s h i p p i n g modes  requirements  effective per y e a r .  capacity  necessary  f o r the  efficient nor  forecast  do  have  volumes.  The  the  present  o f t h e U. S. West Coast i s 5 t o 6 m i l l i o n m e t r i c tons  These p o r t  5  the  facilities  are located  i n t h e Southern  California  San Pedro b a s i n a t t h e P o r t s o f Los Angeles and Long Beach.  The  Port  Channel  o f Los Angeles at berths  Corporation Loading berth  (part  49  and  50.  o f the Shapiro  Enterprises for a  export  Inc.(ABLE).  length  o f 800  feet  coal  terminal  I t i s owned  f a m i l y ) and o p e r a t e d There and  trains  r o t a r y dump. hour  the t e r m i n a l  &  Steel  by American  Bulk  i s served  by  Union line  There i s no l o o p t r a c k so c a r s  must be f e d one by one i n t o  t h e non-indexed  single car  The maximum c a p a c i t y i s a p p r o x i m a t e l y 2,000 m e t r i c tons p e r The f a c i l i t y i s  extremely o l d and was i n i t i a l l y d e s i g n e d t o h a n d l e i r o n o r e , i r o n and z i n c o r e s .  the f a c i l i t y  a t the  (U.P. i s t h e main  w i t h a s t o r a g e c a p a c i t y o f 70,000 t o 120,000 t o n s .  copper  the E a s t  i s 51 f e e t o f water depth  o r i g i n a t i n g i n many c o a l p r o d u c i n g areas.) unit  on  by N a t i o n a l M e t a l  P a c i f i c , Southern P a c i f i c , and Sante Fe R a i l r o a d s .  from  i s located  with c o a l .  pellets,  These o t h e r b u l k p r o d u c t s a r e p r e s e n t l y handled a t T h i s o p e r a t i o n has a h i s t o r y o f s i g n i f i c a n t down  (81)  time  for repair  and maintenance.  It i s unlikely  this  facility  could  handle more than 2 m i l l i o n tons o f thermal c o a l p e r y e a r . ^  The  other  Southern Pier  G  existing  export  facility  i s located  Beach  i s owned  by  the Port  M e t r o p o l i t a n Stevedore Company. old  and was d e s i g n e d  the  t e r m i n a l a t the present  i n i t i a l l y t o handle  of the l o c a l  o f Long  Beach  and  operated  time  iron ore.  i s the export  r e f i n i n g processes.  feet.  There  by  The main f u n c t i o n o f  o f petroleum  Petroleum  i s open  coke  from  coke i s a r e s i d u a l by-  The water depth a t t h e p i e r i s  40-45 f e e t and they can r e a c h 50 f e e t by b r e a s t i n g o f f 8 f e e t . ^ i s 2,100  The  A g a i n , t h e e x i s t i n g f a c i l i t y i s extremely  c a p t i v e s t o r a g e warehouses a t the p o r t .  length  on the  B a s i n o f t h e Long Beach Harbour a t P i e r G ( b e r t h s 212-215). facility  product  i n Long  ground  storage  of  The b e r t h  approximately  135,000 t o n s and t h e maximum l o a d i n g r a t e i s 2,000 m e t r i c t o n s p e r hour.  The P o r t o f Long Beach has e n t e r e d i n t o an agreement w i t h a f a b r i c a t o r and c o n s t r u c t i o n company t o i n s t a l l during  early  dollars. coke, If  1983.  a new 5,000 t o n p e r hour l o a d e r a t P i e r G  The c o s t o f t h i s  project  i s budgeted  The o b j e c t i v e i s t o g a i n more f l e x i b i l i t y  coal,  a t 18 m i l l i o n  i n h a n d l i n g petroleum  and o t h e r major and minor b u l k s through  the P i e r G  facility.  a new t e r m i n a l i s c o n s t r u c t e d no c o a l would be handled a t G.  The Long  Beach t e r m i n a l i s served by t h e Union P a c i f i c , Southern P a c i f i c , and Santa Fe R a i l r o a d s , b u t t h e Union direct  or interchange  Pacific  access  i s the p r i n c i p a l  t o many o f t h e c o a l  States.  (82)  r a i l r o a d with either  fields  i n the Western  Of  the 26  Ports indicated  i n F i g u r e 3.1,  development  programs.  development  p l a n s , t h e U n i t e d S t a t e s would have  terminal expense  I f each  capacity of to  100  announce  a  o f these  o n l y a few a r e c o n t i n u i n g w i t h  million  tons by  development  i n v e s t i g a t i v e o r c o n c e p t u a l study. environmental spending indicated  3  1980  or  dependent major  4  million  locations  capital  environmental  The  most  to  and  not  finalize  proceeded  not go beyond  port  a number  their  development  o f important  commitments.  export  significant  undertake  an  initial  Most  with  factors  phase. this  initial  programs  will  this  complete  Many o f the  more  expensive  announcement made i n  which  prior  anticipate  are c o n t i n u i n g are  t o making their  any  further  engineering  and  s t u d i e s and d e f e r f u r t h e r c o n s i d e r a t i o n u n t i l t h e r e a r e some  long-term throughput  The  I t i s not a  their  However, once an e n g i n e e r i n g study and  dollars  have  and w i l l  1981. on  a West Coast c o a l  1985.  program  proceeded w i t h  assessment have been s t a r t e d , t h e d e v e l o p e r s can  to  investigation  p o r t s had  important  contracts available.  factors  involved  in  the  intermediate  stages  of  development a r e :  (i)  Determination  of  a  functional  terminal design  and  realistic  cost estimates.  (ii)  Securing  adequate  investigative  financing  programs  construction).  (83)  and  packages the  ( f o r both down  the  stream  initial terminal  (iii)  Completion o f s a t i s f a c t o r y e n v i r o n m e n t a l impact assessments.  (iv)  Conclusion  of  stevedoring  company  a  satisfactory  ( o p e r a t i n g c o s t s and  a major component o f any  (v)  Securing  long  term  operating  terminal  throughput  agreement their  a  e s c a l a t i o n are  cost.)  contracts  to  cover  break even l e v e l f o r the d e p r e c i a b l e l i f e o f the  B.  with  an  agreed  assets.  POTENTIAL"DEVELOPMENT"LOCATIONS  Figure  3.2  shows  production  areas  the  Western  distance  locations. the The The  the  distance  Utah,  Arizona,  Mexico  and  sites  most  Southern  from Wyoming, Montana and  the  California  areas.  land  ports  Distance,  range  grades  from  the  Pacific  unit  trains  involved  Northwest.  as  and  Another in  one  Because o f  rail  o f the  extremely  traversing  opposed  to  the  the  miles  sources. from  the  factors relating  important coast  factor i s  and  interior  l o c a t i o n s t o the proposed p o r t s  these  gradients  eighty-four  (84)  are  some C o l o r a d o l o c a t i o n s .  800-1,100  however, i s o n l y  transportation cost.  Westbound  and  Colorado  the Northwestern S t a t e s p o r t s i t e s  the U n i o n  and B u r l i n g t o n N o r t h e r n R a i l r o a d have i n d i c a t e d they w i l l use car  deposit  development p r o p o s a l  New  mountains en r o u t e from the c o a l p r o d u c i n g in  coal  p o r t s i n the Northwest range from 1,100-1,400 m i l e s from c o a l  producing to  from  primary  In g e n e r a l , Southern C a l i f o r n i a i s the p r e f e r r e d  N o r t h e r n C a l i f o r n i a and  shortest  States  i n c l u d i n g the major p o r t  the s e r v i c i n g r a i l r o a d s . hauling  United  to  one  Pacific  seventy-five  hundred  car  unit  t r a i n s used i n the Southern C a l i f o r n i a s e c t o r . the  grade  increases  may  be  changed.  The  There i s no economical way  only  alternative  available i s  s u b s t a n t i a l i n c r e a s e s i n l i n e h a u l power (thereby s i g n i f i c a n t l y  increasing  costs).  The  Southern  advantage Southern most  California  i n ocean  vessel this  The  also  appear  to  ocean t r a n s p o r t  locations.  The  economies  but  disadvantage.  these  Resolution  of  appear these  There  to  be  are  compared of  some deep  plagued  problems  will  with  a  comparative  d i s t a n c e t o Japan from  i s a p p r o x i m a t e l y 4,850 m i l e s  port  have  t o 4,300 from  scale  s i z e c a p a b i l i t y o f Long Beach and Los Angeles w i l l  distance  Sound  shipping.  California  Northwest  locations  water  of  the  e a s i l y overcome ports  environmental  extend  the  larger  i n Puget problems.  planning  horizon  s i g n i f i c a n t l y f o r these s i t e s .  At  the  present  time  development programs. long  there  are  number  of  ports  which  have  active  They a r e p u r s u i n g the P a c i f i c Rim markets t o s e c u r e  term throughput c o n t r a c t s  development  a  programs.  The  t o be used as the f i n a n c i n g base  f o l l o w i n g paragraphs p r o v i d e a b r i e f  f o r the synopsis  on each o f t h e s e l o c a t i o n s :  1.  Port  o f Vancouver,  Westmoreland  coal  —  A  Resources I n c o r p o r a t e d ,  Morrison-Knudsen location.  Washington  have  It will  deposits  joined  Powder  River  (85)  consisting  of the  Port,  Penn V i r g i n i a C o r p o r a t i o n , and  together  rely principally  i n the  group  to  develop  this  on the Westmoreland Basin  which  would  terminal  Corporation be  marketed  through  this  project  t o generate b u s i n e s s f o r t h e i r p o r t e n g i n e e r i n g c o n s t r u c t i o n  division  port  facility.  (presently  activity).  experiencing  The proposed  j u n c t i o n o f t h e Columbia from  the P a c i f i c  initial  Morrison-Knudsen  very  slow  s i t e i s 42 a c r e s  period  i n terms o f  (owned by t h e P o r t ) a t t h e  and W i l l i a m e t t R i v e r s a p p r o x i m a t e l y 93 m i l e s  Ocean.  phase would  a  i s i n v o l v e d i n the  A two-phase development  handle  approximately  i s proposed.  The  two t o t h r e e m i l l i o n  tons  p e r y e a r and expand t o e i g h t m i l l i o n tons p e r y e a r a t a f u t u r e d a t e . The  initial  capability million  and w i l l  1984.  Trade  railroads Pacific.  The P o r t  coal  channel  servicing  i n the Columbia  o f Kalama,  Washington  Resources facility  amount.  s h i p l o a d e r and a  i s planned  f o r late  R i v e r and b a r .  Again,  with  The d e v e l o p e r s  as a v e h i c l e  The  and Union  Pacific  Resources of their  The s i t e i s l o c a t e d  R i v e r and c o n s i s t s o f 175 a c r e s upon t o proceed  with  a  long-term  i s p r e d i c a t e d upon a 5-15 m i l l i o n t o n  storage  t h e maximum  are the Port o f  t o expedite sales  United States.  an o p t i o n  The development p l a n throughput  —  Incorporated (PRI).  t h e western  PRI p r e s e n t l y h o l d s  year  expansion  t o c o s t $40-50  s i t e are the B u r l i n g t o n Northern  a t M i l e P o s t 72 o f t h e Columbia  per  date  an  on t h e use o f panamax v e s s e l s g i v e n t h e  depth  this  r e s o u r c e s from  lease.  with  8  t o use t h i s  which  tons  i s forecast  The o p e r a t i o n a l s t a r t  Kalama and P a c i f i c hopes  The p r o j e c t  would be based  maximum  a t 150,000  i n c l u d e one 2,500 t o n p e r hour  c a r dumper.  feet  i s planned  o f 300,000 t o n s .  rotary  39  2.  storage  vessel  (86)  capacity size  o f about  10% o f  on t h e Columbia  this  river i s  panamax. include  This two  facility  to  environmental  three  i s e n v i s a g e d t o c o s t $70-80 m i l l i o n  3,000-5,000 t o n  impact  statement  was  per  released  comment p e r i o d w i l l be e x p i r i n g soon. date  in  Union  3.  1984.  The  Pacific.  and  the  directly  This  the  with  throughput  river  million.  The  hand and are  in  Phase  II  The  of  the  site  from  the  terminal  4.  the  Northern  and  i s l o c a t e d on  100  proposed  terminal  coal  Storage  planned  is  18  be  call  6,000 t o n per  tons  land  site  5-10%  of  at  tons  per  and  h e l d i n e a r l y 1982.  construction  1983.  year annual  and  $80  and  present  Dravo^"  plans  were  These have been d e l a y e d  time.  hour l o a d e r  s e r v i c i n g r a i l r o a d s are  of  12 m i l l i o n  million for  acres  c o n s t r u c t i o n p e r m i t s are p r e s e n t l y i n  ceremony was  a t the  Coal  F i n a n c i a l Corporation),  to  i n late  activity  The  and  developed by P a c i f i c  increasing  design  construction  The  final  indicate a startup  the c u r r e n t slowdown i n c o a l s a l e s t o the P a c i f i c Rim  f o r one  1982  Burlington  Guaranty  The  e n v i r o n m e n t a l and  charge the  The  development i s p r o j e c t e d t o c o s t between $60  a ground b r e a k i n g  complete  early  Phase I i s i n d i c a t e d t o  capability.  throughput.  American  of P o r t l a n d .  across  year  l o c a t i o n i s being  the  Vancouver, Washington. per  in  Their plans  s e r v i c i n g r a i l r o a d s are  (owned by  Port  loaders.  will  9  P o r t l a n d , Oregon — Corporation  hour  and  Burlington  and  Their  and  to  given  t h e r e i s no  development  plans  a s i n g l e r o t a r y c a r dump.  Northern  and  Union  Pacific.  maximum s h i p s i z e w i l l be panamax v e s s e l s . ^  A s t o r i a , "Oregon Northern,  Nerco,  —  The  PanOcean  developers Bulk  (87)  of t h i s  Carriers  l o c a t i o n are  Limited,  and  Burlington  the  Port  of  Astoria.  Located  there  be  may  vessels  a  above  accommodate  10  panamax  a  forecast  from  possibility  10  and  of  per  in  year  $50  and  $60  P o r t o f Coos Bay  and  p e r m i t t i n g and  12  million  Colorado  supplemented by  coal.  I f the  the  50,000  1990's.  deadweight  approximately cost. and  The  The  $30-40  advantage  avoidance  of  bulk  4-5  rail is  which  million  1988.  i s 35  joined  The The  project  R i v e r and  equal.14  (88)  i s i n the  environmental  impact  export  (after  the  could  be  deepened  i s i t s shorter r a i l ranges  coal  accommodate  i n c l u d e d as  mountain  and  development  3  f e e t which can This  1-1/2  cleaning).  tons p e r y e a r o f Utah  c o u l d be  location  some o f  project  p l a n n e d t o handle 3-4  a  for  project distance  required i n  Puget Sound p o r t l o c a t i o n s .  d i s t a n c e from P r i c e , Utah t o Coos Bay  approximately  ton  m i l l i o n tons per y e a r o f t h i s  carriers.  of t h i s  shipment t o the Columbia  600,000  Canasia  million  depth  million  crossing  to  an o p e r a t i o n a l  a n t i c i p a t e d Powder R i v e r B a s i n ^  harbour  ton  planned  The  The d e v e l o p e r s p l a n t o i n i t i a l l y  t a k e s p l a c e , t h e y a l s o p l a n on 5-6 in  by  has  tons p e r year o f Canasia's Oregon c o a l  T h i s would be  allow  with  d e t a i l e d e n g i n e e r i n g phase.  a n a l y s i s i s under way. - 2 million  tons  and  to  2  C o a l Company t o develop a c o a l f a c i l i t y 1983  is  River,  B u r l i n g t o n N o r t h e r n i s the o n l y  Coos  by  site  million  location.^  tons  stages  terminal with  s e r v i c i n g r a i l r o a d to t h i s  The  Columbia  2,500 t o n p e r hour l o a d e r s .  t o c o s t between  Bay, "Oregon —  the  later  85-acre  s t a r t u p date i s a n t i c i p a t e d i n 1985.  5.  mouth o f  The  ton  two  the  dredging  size.  million  storage c a p a b i l i t y is  miles  The  and Long Beach, C a l i f o r n i a  6.  Stockton, C a l i f o r n i a of  S t o c k t o n , Crowley  —  The  d e v e l o p e r s o f t h i s p r o j e c t a r e the P o r t  M a r i t i m e C o r p o r a t i o n , and M e t r o p o l i t a n Stevedore  Company.  The  finished.  T h i s p r o j e c t , i n c l u d i n g a l o o p t r a c k , r o t a r y dump p i t , and  4,000  ton  October,  p e r m i t t i n g i s complete  per  hour  1982.  loader,  is  I t i s located  and  c o n s t r u c t i o n i s about  scheduled  for  100  of  on  acres  full  80%  operation  by  l a n d a t the P o r t o f  S t o c k t o n and i s p r o j e c t e d t o handle 2.5 m i l l i o n tons o f c o a l p e r y e a r in  the  first  anticipated  stage.  later  300,000-400,000 cargos  such  in  tons  as  Expansion the  and  copper  anticipates  location  7.  are  With  draft  tons.  1 5  Port  Southern  limits  o f " Los  Storage on and  a  —  tons  per  capacity  amount  soda  s m a l l share  s t a r t - u p date.  32  the  T h i s t e r m i n a l was  Pacific,  of  Angeles  i n v e s t o r s and not have any  early  million  ash  of  year will  other  that  share  Western  feet  the  The  port  o f the  The  export  railroads  Pacific,  maximum  is be bulk the  o r i g i n a l l y designed to  I t has been r e d e s i g n e d t o handle c o a l  controlling  market g i v e n the  depend  concentrate  handle copper c o n c e n t r a t e .  5  decade.  will  t e r m i n a l and s t o r a g e a r e a s .  now  to  and  shipment  and  steam  coal  servicing  this  the  Sante  Fe.  size  i s 30,000  i s p r e s e n t l y seeking  interested  o p e r a t o r s i n t h e i r p o t e n t i a l f a c i l i t y but as o f y e t do j o i n t v e n t u r e members.  They have r e t a i n e d the Long Term  C r e d i t Bank o f Japan as f i n a n c i a l a d v i s o r s on the p r o j e c t .  T h i s bank  i s a l s o a s s i s t i n g w i t h some o f the m a r k e t i n g and a t t e m p t i n g t o s e c u r e l o n g term plans  c o n t r a c t s t o be used  include  an  initial  as a f i n a n c i n g base.  capability  (89)  of  15  million  The  development  tons  per  year  i n c r e a s i n g t o 20-30 m i l l i o n tons p e r year by 1990.  The s i t e would be  200 a c r e s o f l a n d t h a t i s c u r r e n t l y b e i n g r e c l a i m e d through on  Terminal  Island.  Plans  call  dredging  f o r two 4,000-6,000 tons  s h i p l o a d e r s and a s t o r a g e c a p a b i l i t y o f 2-3 m i l l i o n  p e r hour  tons.  With t h e  l a n d p r e p a r a t i o n c o s t s i n c l u d e d i n the p r o j e c t development i t appears the  total  c o s t s would  be i n t h e r e g i o n o f $450 m i l l i o n .  Terminal  c o n s t r u c t i o n would n o t be complete u n t i l 3-5 y e a r s a f t e r t h e l a n d f i l l completion facility  (earliest could  1987-1988).  handle  65-foot  With depth  150,000-200,000 t o n v e s s e l s t o c a l l . t e r m i n a l a r e Union P a c i f i c , Southern  8.  Long Beach — is  loader  throughput group  and  C.  on  the  and  Crowley  loaders.  o f Union  side  has  i s being  more  this  The r a i l r o a d s  would  been  initial be  the allow  servicing  this  P a c i f i c , and Santa F e . ^ 1  storage.  Pacific  The f i r s t  This  will  tons p e r y e a r . Land  Additionally a o f Long  C o r p o r a t i o n , M e t r o p o l i t a n Stevedore  Company  of  the  Cerritos  completed,  prepared.  throughput 700,000  and  Company,  increase i t s  the Port  t o develop Channel.  a  design  Environmental  The t e r m i n a l f a c i l i t y  will  dredging  P i e r G f a c i l i t y which i n c l u d e s a new  t o 4-6 m i l l i o n  Maritime  north  complete.  storage  vessels,  I t o h , have formed a j o i n t v e n t u r e  package  year  slightly  capability  engineering  per  o f the present  consisting  Beach,  little  There a r e two developments a t t h i s l o c a t i o n .  an expansion  ship  very  i s designed  with  two  Development c o s t s a r e e s t i m a t e d  (90)  The and  site  conceptual  construct b i d  permitting  i s nearly  around a 15 m i l l i o n t o n  i n c r e a s i n g t o 30  tons  a 100 a c r e  6,000  million  tons.  t o n p e r hour  The ship  t o be i n t h e r e g i o n o f 250  million  U.S.  in late  1985.  to  65  enable  feet  Plans c a l l  I t i s served  miles  fields  i s forecast  this  as a p r o j e c t  by Union P a c i f i c ,  These Southern C a l i f o r n i a  from  the c o a l  i n Colorado.  fields  More  will  can be  seen  from  the port  appear t o be any g e n e r a l should  and  This  would  coal at this and Sante  1,000-1,200  be g i v e n  from t h e  on t h e Long  Beach  7  outlined  above,  there  does n o t terminal  H. P. Drewry p r o j e c t s t h a t i n t h e next  30% o f t h e West Coast e x p o r t c o a l w i l l  vessels.^  to load  b e l i e f t h a t t h e f i r s t West Coast e x p o r t  be a deep water l o c a t i o n .  10-15 y e a r s , size  projects  This  l o c a t i o n s are approximately  i n Utah  detail  cost.  Southern P a c i f i c  l o c a t i o n and development l a t e r i n t h e p a p e r . ^  As  t o commence  f o r d r e d g i n g t h e approach channel and b e r t h  and c a p i t a l i z i n g  railroads.  800  operation  150,000-170,000 deadweight t o n c o l l i e r s  location. Fe  d o l l a r s and t e r m i n a l  supports  the  claims  of  be c a r r i e d i n panamax most  Columbia  River  d e v e l o p e r s t h a t t h e l i m i t a t i o n t o panamax s i z e v e s s e l s i s n o t an i n h i b i t e r to  the  growth  of  the P a c i f i c  Rim  export  trade  through  their  ports.  A d d i t i o n a l l y , t h e P a c i f i c Rim p u r c h a s i n g p o l i c i e s as o u t l i n e d i n Chapter 2 indicate  that  only  capable of handling  Most for The  forecasts more  than  immediate  terminal facility.  be  a small  number  of ports  or r e c e i v i n g centers  will  be  t h e l a r g e r tonnage v e s s e l s .  indicate that one c o a l  export  questions located;  i n the long  to  and  I t i s unlikely  terminal  be  should that  run t h e r e w i l l on t h e U n i t e d  answered i t be  a r e : where a  deep  any o f t h e p o r t  (91)  or  be a requirement  States  West C o a s t .  should medium  projects  the  first  draft  port  will  proceed  without  at  appears  that  advantage product should  least  of  the  price  C.  the  One  of  base to  cargo  proceed  in  the  Pacific  more f a v o r a b l e  be  near  Rim  transportation available  throughput will  economies i n the  inland  the  of  project  differentials  export terminal The  first  competitive  minimize  vessels.  amount  transportation  more  sealift  some  guarantees.  one  term  can  take  t o make the  U.S.  markets.  costs  between  locations  that  Such  and  It  take  a  location  advantage  panamax  and  f o r the  first  larger West  of  size Coast  i s the C e r r i t o s Channel P r o j e c t a t Long Beach, C a l i f o r n i a .  advantages o f t h i s p o r t l o c a t i o n are o u t l i n e d i n the next s e c t i o n .  THE -LONG"BEACH EXAMPLE  There  are  two  main  reasons  for  using  the  Port  of  Long Beach as  a  case  study i n t h i s t h e s i s :  (i)  From a p u r e l y Pedro level  Bay  logistical  route  Utah/Colorado  does  not  dredging. corridor  is  to the  The  from  Long only  involve  the  Beach/  and  it  first  highest  L.A.  Southern C a l i f o r n i a  major  climate  environmental  in  the  operational  port  of any  The  area  than  site.  (92)  coals Los  problems  most  is  from  Angeles,  and  along  a l t e r n a t i v e on  or  San  and  location available  advantages i n h e r e n t  large terminal  shortest  quality  Other  f e a s i b l e deep water  i s the most f a v o r a b l e  logistics as the  o f view, the  l o c a t i o n o f f e r s many advantages.  grade  location  point  this which  substantial the  the  transport  Coast.  The  i n t h i s l o c a t i o n favor  ( i i ) This' p r o j e c t r e p r e s e n t s t h e most complete development p l a n t o d a t e . Considerable joint  time  venture  been  made  management  towards  environmental While  and c a p i t a l  other  have been spent  and o p e r a t i o n a l team.  completing  permitting, terminal  i n drawing t o g e t h e r  the  and  engineering  other  important  l o c a t i o n s have  slowed  Major p r o g r e s s  has  design  the  study,  terminal  down  a  their  aspects.  development  program due t o t h e p r e s e n t s o f t market f o r steam c o a l i n t h e P a c i f i c Rim,  The  t h e Long Beach P r o j e c t i s c o n t i n u i n g on p l a n and on s c h e d u l e .  Port  o f Long Beach management  has a r e p u t a t i o n f o r o p e r a t i n g one o f  the more a g g r e s s i v e p u b l i c p o r t s on the Coast i n r e g a r d t o t h e i r p l a n n i n g a b i l i t i e s and e f f o r t s t o expand the p o r t b u s i n e s s .  strategic  F o r some time  the Commissioners o f t h e P o r t o f Long Beach have e n t e r t a i n e d t h e o b j e c t i v e of  expanding  completely  their  new  present  Kaiser Engineers Union  exporting  " s t a t e o f the a r t " export  j o i n e d with Union P a c i f i c  on  coal  facility  and/or  terminal.  Land C o r p o r a t i o n  (Upland  developing  In J u l y ,  1981, they  I n d u s t r i e s ) t o fund a  study on the p r o s p e c t o f d e v e l o p i n g a c o a l p o r t  Pacific  Land  property  north  of  a  Cerritos  facility  Channel.  Upland  I n d u s t r i e s became i n v o l v e d as t h e y saw a p r o f i t a b l e o p p o r t u n i t y o f l e a s i n g a  large block  drilling  The  t o the p r o j e c t .  This  land  i s c u r r e n t l y an  o i l  f i e l d which would a l l o w an a d d i t i o n a l s u r f a c e a r e a u s e .  Kaiser  million  of land  Engineers  (1982 d o l l a r s  Conceptual  indicated  e x c l u d i n g removal  modern b u l k  loading f a c i l i t y  year  be  could  Study  constructed  capable on  that  and r e d r i l l i n g  o f 10-15 m i l l i o n  the d e s i g n a t e d  (93)  f o r a c o s t o f $112  site.  of o i l w e l l s ) ,  tons throughput The  Kaiser  a  per Study  further indicated that at t h i s c a p i t a l would be c o m p e t i t i v e w i t h any The  Port  equity was  and  Upland  Industries at  this  point  development of  t o l o c a t e p a r t n e r s capable and  the  s i t e and  operation  o t h e r p o t e n t i a l l o c a t i o n s on the West  p a r t i c i p a n t s f o r the  expertise  cost l e v e l ,  decided  t o seek a d d i t i o n a l  this  project.  of p r o v i d i n g cash  resources  o p e r a t i o n a l a s s i s t a n c e i n the  areas  Coast.  The  objective  i n addition to  of terminal  operation,  m a r i t i m e s h i p p i n g , m a r k e t i n g t o the end u s e r s , p l u s d e s i g n e n g i n e e r i n g construction. Crowley  Maritime  Corporation that  the  joined  Through a p e r i o d of n e g o t i a t e d d i s c u s s i o n s , they Corporation  of Long Beach, and  project  with  the  participation  represented Port  and  levels.  of  San  C.  I t o h and  a  Francisco,  reasonable  Upland  on  the  This represented  investment basis  the  approached  Metropolitan  Company o f Japan.  of  formal  Stevedore  Each  agreed  opportunity  preliminary  beginning  and  equity  of the  Long  Beach I n t e r n a t i o n a l C o a l P r o j e c t ( L . B . I . C P . ) commencing a c t i v i t i e s on p r o j e c t i n August of  T h i s program has  environmental  impact  hearings;  a  the  and  United  Korea.  A  complete  advantage of Yen  marketing  and  the  c r e d i t f i n a n c i n g and  environmental  campaign  Pacific  financial  and U.S.  a c t i v e l y pursued a development  i n c l u d e d : a major c o n c e p t u a l  statements;  full  States  the  1981.  Over the l a s t twelve months, t h i s group has program.  and  Rim  program  and  impact  reports;  i n f o r m a t i o n program  countries was  engineering  also  of  Japan,  developed  d o l l a r financing including various  study; public in  both  Taiwan, to  take  and best  import/export  leveraged leases.  From an o p e r a t i o n a l p o i n t of view, the Long Beach l o c a t i o n o f f e r s a number of  distinct  advantages  which  are  important (94)  in  the  short  term.  These  advantages  will  t h a t U.S.  a l l o w t r a n s p o r t a t i o n s a v i n g s t o be e f f e c t e d t o the e x t e n t  West c o a l  demand growth  can become more c o m p e t i t i v e i n the P a c i f i c Rim.  f o r U.S.  Western  coals  by  Pacific  Rim  The  users i s predicated  upon i t s c o m p e t i t i v e n e s s w i t h o t h e r s u p p l i e r s .  In  terms  800  of inland  miles of r a i l  Long  Beach  transport  t h e r e i s a s a v i n g s o f between 300  h a u l compared t o p o i n t s i n t h e P a c i f i c Northwest.  route to  transportation  also  avoids  the Northwest.  the  long  These  and  grades  steep  require  grades that  The  involved  in  trains  are  unit  s m a l l e r i n cargo component and r e q u i r e s u b s t a n t i a l l y more energy and to  move a v e r y s h o r t d i s t a n c e .  the  Southern C a l i f o r n i a  which  tend  coal.  1 9  life  and  conveyor  to  Other advantages on the t r a n s p o r t  location  increase  the  combustibility  of  make  i t more d i f f i c u l t  systems.  The  is  a  Puget  or o t h e r Northwest  difference  of  these  demonstrated  $6.. 00-$8.00 Sound  ton  effect  t o handle  the  between  Utah  in and  locations  exporting  the  lower  Colorado 2  on  the  corridor  quality  rotary  the p r i c e  estimated  locations. ^  i n f a v o u r o f Long Beach  through  items  time  o f i c e , snow, and  M o i s t u r e and c o l d temperatures g e n e r a l l y s h o r t e n c o a l ' s  transportation  Colorado  enjoys are l a c k  and  Long  There  rain steam  stockpile dump  o f the  differential Beach  i s also  versus  Beach  and  and rail of the  an e s t i m a t e d  o f $2.00-$5.00 a t o n between Utah  through Long  and  Wyoming and  and  Montana  l o c a t i o n s e x p o r t i n g through the Northwestern ports.21  There a r e a l s o advantages Long Beach the  site.  i n ocean s h i p p i n g t o l o c a t i n g a t e r m i n a l a t the  In the s h o r t term t h i s advantage  g r e a t s u r p l u s o f Panamax s i z e v e s s e l s .  (95)  i s not as g r e a t due t o  T h i s has caused panamax owners  in  this  present  recovery.  market  t o operate  a t something  less  than  a  full  cost  They may p r i c e t h e i r v e s s e l s on t h e b a s i s o f v a r i a b l e c o s t s t o  keep them out o f l a y up and a v o i d  the high  vessel  large  back  into  operation.  Most  r e s t a r t costs  vessels  of bringing a  o f the  100,000-150,000  deadweight type a r e b u i l t f o r a s p e c i f i c term c o n t r a c t and t h e r e a r e n o t a great that  number  a v a i l a b l e on t h e open c h a r t e r  t o use l a r g e r tonnage v e s s e l s  building.  This  would  only  be  market.  i n the short  undertaken  by  This  s i t u a t i o n means  term may  an  owner  require  i f he  a  could  new be  a s s u r e d o f a l o n g term c o n t r a c t which would i n c l u d e c o v e r i n g h i s o p e r a t i n g costs  and r e t u r n i n g  comparing operating  the  a reasonable  full  cost  price  profit  to h i s c a p i t a l  of the l a r g e r  vessel  t h a t t h e panamax v e s s e l can l i k e l y be c h a r t e r e d  of  capacity.  present  problem. in  oversupply  100,000-150,000  transport  advantages  capable  of handling  project  developers  voyage d i s t a n c e  size  i n t h e ocean  shipping  t o n deadweight  market  to  t h e Long  only  panamax  determined  Beach size  that,  taking  f o r the  world s i t u a t i o n  is a  offer  over  vessels.  after  the v a r i a b l e  short  dictate that  will  location  from Long Beach t o t h e P a c i f i c  the b e n e f i t of using vessel  category  In  f o r l e s s money p e r t o n  In t h e l o n g r u n , economies o f s c a l e s h o u l d  the  Port,  with  c o s t p r i c i n g o f t h e panamax v e s s e l , t h e p r e s e n t  is  This  investment.  other  In May account  of  term  vessels  significant locations 1982, t h e  of the  Rim over a Columbia  longer River  a 125,000 t o n deadweight v e s s e l over a panamax  shipment  $3.56-$5.00 p e r t o n i n f a v o u r  o f steam  coal  o f Long B e a c h .  (96)  2 2  would  be  i n t h e range o f  Average  weather  important. of  conditions  at  the  lower  quality  than  s h i p p e d t o t h e P a c i f i c Rim u s e r s . i n t h e steam  locations  i n rainy  terminals w i l l degeneration, moisture.  also  very  coal  product  climates  such  will as  other  spontaneous  The amount o f r a i n  price  development California  of  storage caused  life,  by t h e  enhance t h e s t o r a g e l i f e  product  o f the  t o v e s s e l owners who  on board  about t h e p o s s i b i l i t i e s  their  v e s s e l s and  o f f i r e and/or o t h e r  c h o i c e can make a s u b s t a n t i a l  the product.  o f t h e West location  These  reactions.  optimum p o r t l o c a t i o n  delivered  Northwest.  reactions  a l s o mean l e s s concern  be p u t t i n g a c o n s i d e r a b l y d r i e r  chemical/spontaneous  f o r terminal  and g e n e r a l c l i m a t i c c o n d i t i o n s i n t h e San  It will  be l e s s concerned  problems  about t h e p r o d u c t  chemical  steam c o a l p r o d u c t .  hence w i l l  present  the P a c i f i c  need t o be more concerned and  coals previously  The h i g h e r s u l p h u r c o n t e n t and i n h e r e n t  f a v o u r a b l e and w i l l  An  are  the m e t a l l u r g i c a l  Pedro B a s i n a r e v e r y  will  location  The steam c o a l s a n t i c i p a t e d i n t h i s new e x p o r t market w i l l be  substantially  moisture  terminal  Coast  steam  has s e v e r a l  which have l e d t h e d e v e l o p e r s  This coal  distinct  is a  difference i n the  critical  export  trade.  advantages  aspect The  t o the Southern  as o u t l i n e d  above  t o p r e s s on w i t h t h e i r program and r e c e i v e  the c o n t i n u e d support o f a number o f t h e major p u r c h a s i n g a g e n c i e s i n t h e P a c i f i c Rim c o u n t r i e s . major  coal  I t i s e n t i r e l y r e a s o n a b l e t o expect t h a t t h e f i r s t  t e r m i n a l t o be b u i l t  on t h e West Coast  w i l l be a t Long Beach.  (97)  of the United  States  END"NOTES  1. Western Governors P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Report of t h e Demand Task Group, Western C o a l E x p o r t s t o t h e P a c i f i c B a s i n , 1982, p. 6. 2. Report t o the Long Beach I n t e r n a t i o n a l C o a l P r o j e c t E n g i n e e r i n g Subcommittee, made by C. I t o h and Company, September, 1981. 3. Western Governors P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Report of the P o r t and Marine Task Group, Western C o a l E x p o r t s t o the P a c i f i c B a s i n , 1982, pp. 7-10. 4. World C o a l Study, C o a l -- B r i d g e t o the F u t u r e , C a r r o l l L. W i l s o n , P r o j e c t D i r e c t o r , (Cambridge, Mass.: B a l l i n g e r P u b l i s h i n g Co., 1981), p. 44. 5. I n t e r v i e w on Chief Executive Officer California. 6.  March 16, 1982 w i t h Mr. A l l a n Ide, P r e s i d e n t and of Metropolitan Stevedore Company, Wilmington,  Ibid.  7. Breasting-of f — f l o a t i n g equipment which a c t s d i s t a n c e from the p i e r f a c e .  i n v o l v e s t h e use o f s m a l l l i k e a spacer by h o l d i n g the  barges ship a  or other specified  8. Norman R. Linse, "Pacific Rim Transportation Outlook", p r e s e n t a t i o n made a t P a c i f i c Rim C o a l Trade Conference, C o a l Outlook, January, 1982, p. 4. 9.  I b i d . , p.  10. Dravo, P i t t s b u r g , Penn.  a  6. major  c o n s t r u c t i o n and  11. Western Governors P o l i c y Task Group, op. c i t . , pp. 143-144. 12.  I b i d . , pp.  Office,  engineering  Report  of  company  the  Port  located i n  and  Marine  139-142.  13. Powder R i v e r B a s i n - an a r e a i n Wyoming and Montana t h a t c o n s i s t s of one o f the l a r g e s t c o a l r e s e r v e areas i n the U n i t e d S t a t e s . The C o a l (mostly s u r f a c e mines) i s of medium q u a l i t y (BTU/lb approx. 7500 and h i g h moisture). 14. J e f f r e y T. W i l l i a m s , Utah and C o l o r a d o C o a l E x p o r t s t o the P a c i f i c Rim, Utah Energy Office, Resource Development and Environment, Utah L e g i s l a t i v e P r i n t i n g O f f i c e , 1981, p. 65.  (98)  15.  T h i s p r o j e c t c u r r e n t l y under my  16.  P o r t o f Los Angeles 1981  17.  T h i s p r o j e c t was  under my  d i r e c t i o n f o r CMC  partner, i  annual statements. d i r e c t i o n f o r the CMC  partner.  18. H. P. Drewry ( S h i p p i n g C o n s u l t a n t s ) L i m i t e d , Research D i v i s i o n , The Growth o f Steam C o a l Trade, "A Review and F o r e c a s t of I n t e r n a t i o n a l Trade i n Thermal C o a l and S h i p p i n g Requirements: 1980-90", 1980, p. 130. 19. Steam c o a l g e n e r a l y has an i n h e r e n t s u r f a c e m o i s t u r e o f 5-8%. If s u b j e c t e d t o s i g n i f i c a n t r a i n or o t h e r m o i s t u r e , spontaneous r e a c t i o n s between the a d d i t i o n a l m o i s t u r e and the s u l p h u r i n the c o a l can r e s u l t . This reaction can r e s u l t i n the p r o d u c t i o n o f a c i d , o r the g e n e r a t i o n of heat which can s e t the c o a l a f i r e . 20. P a c i f i c Rim 21.  J o e l P r i c e , " P a c i f i c Rim Market Overview", p r e s e n t a t i o n C o a l Trade C o n f e r e n c e , C o a l Outlook, January, 1982.  at  the  Ibid.,  22. Report to the Marketing Subcommittee of the Long Beach I n t e r n a t i o n a l C o a l P r o j e c t , made by the P o r t of Long Beach, A p r i l , 1982.  •(99)  TABLES AND FIGURES  (100)  FIGURE 3.1 POTENTIAL  c d  WASHINGTON  PUGET SOUND a. b. c. d. e. f. g.  ro e  TERMINAL SITES  Bellingham Anacortes Tulalip Everett Tacoma West Tacoma Dupont  . COLUMBIA RIVER h. i.  OREGON  j. k. 1.  •o  m.  Longview Kalama Vancouver Portland Astoria Warrenton  NORTHWEST COAST n. o.  Grays Harbor Coos Bay  BAY/RIVERS  CALIFORNIA  p. q. r. s. t. u. v.  Sacramento Stockton Benicia Selby . Richmond San F r a n c i s c o Redwood C i t y  SOUTH COAST u  w. x. y.  P o r t Hueneme Los Angeles Long Beach  ALASKA Seward  PACIFIC OCEAN Source:  w CETF. Report o f t h e P o r t s and M a r i n e Task Group. (Soros A s s o c i a t e s , 1981), p . 375.  (101)  <4  FIGURE  GRAYS HARBOR COLUMBIA RIVER PORTS WARRENTON ASTORIA LONGVIEW KALAMA VANCOUVER PORTLAND  fBN/UP ^*VJ3N BN^  B  ,  N  UP SP  COOS BAY  UP WP UP  o to  ISP  SACRAMENTO, STOCKTON BENICIA SELBY RICHMOND SAN FRANCISCO REDWOOD CITY  PORT HUENEME LOS ANGELES LONG BEACH Source:  As i n F i g u r e #3.2b  WP/SP.  'WP  UP .SP  r  1  FIGURE '3.2b  Source:  Puget Sound C o a l E x p o r t O p p o r t u n i t i e s CH2M HILL February 1982, p. 103.  (103)  and"Issues  CHAPTER 4  MANAGING'A JOINT VENTURE:" ISSUES IN ORGANIZATIONAL'DEVELOPMENT  AND STRUCTURE  INTRODUCTION  The  purpose o f t h i s  involved  c h a p t e r i s t o h i g h l i g h t the s i g n i f i c a n t  i n establishing a multi-partner  transport project. conceptual  and  The d i s c u s s i o n w i l l  operational  origins  i n t e r n a l problems  j o i n t v e n t u r e t o undertake a complex delve of  i n t o the d e t a i l e d aspects of the  the  Long  Beach  Project.  The  o r g a n i z a t i o n a l i s s u e s i n v o l v e d i n s e t t i n g up a f u n c t i o n a l management framework for  such  internal  a large  p r o j e c t a r e enormous and complex.  organizational  issues  p a r t i c i p a n t s , sub-contractors  The  management  discussed  structure  i n relation  i s developed  to alternate  the owners a r e a l s o d i s c u s s e d  through  and t h e i r r e s p e c t i v e  established  by  The c o m p l e x i t y o f these  the  frameworks.  a  discussion  of the  responsibilities.  developers The d i v e r s e  i s presented objectives  and among  as they a f f e c t t h e o r g a n i z a t i o n a l development.  PART I - MULTI-ORGANIZATIONAL DECISION MAKING  A.  THE PLANNING/CONCEPTUAL  Decision realm  making  can be  PHASE  difficult  of a multi-organizational  cohesiveness  of  the  group  and  within joint the  (104)  a  single  venture soundness  organization;  i t can be a t e s t of  the p r o j e c t  i n the of the format.  W i l l i a m Evan i n d i c a t e s "the phenomena and problems o f i n t e r - o r g a n i z a t i o n a l r e l a t i o n s a r e part o f the general all  types  of social  systems.  A l l such  enormously c o m p l e x . F r i e d m a n of a j o i n t also  that  The  3  conceptual  a  planning  side  phase  environment  of uncertainty.  continually  made  social/political aspect  objective.  i s most  of a  project  Changes  situation  changes.  t o be  severely as  and  strained  decisions  Timeliness  emotional" during  a r e made  objectives  or operational  They  2  the  i n an  have  t o be  t r a d e - o f f s and  i s also  an  important  Group d e c i s i o n making can be c o n t r a r y t o t h i s  i s further  geographical  "technical  to original  for financial  This  significant  has both  t o allow  o f many d e c i s i o n s .  r e l a t i o n s tend  venture i s t h a t o f p a r t n e r s h i p " .  partnership  emotional  boundary  & Kalmanoff i n d i c a t e " t h e c e n t r a l concept  i n t e r n a t i o n a l business  indicate  aspects.  c l a s s o f boundary r e l a t i o n s c o n f r o n t i n g  exacerbated  distances  i n the Long  and t r a v e l  Beach  time i n v o l v e d  group  by  to allow the  p a r t i c i p a n t s t o meet on a f a c e t o f a c e b a s i s .  For  the  Long  Beach  International  Coal  Project  (LBICP),  five  major  o r g a n i z a t i o n s , t h e P o r t o f Long Beach, Upland I n d u s t r i e s , Crowley M a r i t i m e Corporation,  C. I t o h  and Company, and M e t r o p o l i t a n  have formed two i n t e r - r e l a t e d j o i n t v e n t u r e s . conceptually  design  and p l a n  the t e r m i n a l ;  Stevedore  Corporation  The o b j e c t i v e s a r e t o :  and (b) c o n s t r u c t  (a)  and o p e r a t e  the t e r m i n a l on t h e C e r r i t o s Channel o f t h e Long Beach Harbour.  The  nesting  of  one  development program. the  United  States  joint  venture  within  another  However, t h e i n s t i t u t i o n a l  legal  system  necessitates  (105)  complicates  and r e g u l a t o r y  this  type  the  f a b r i c of  o f program  fora  public  p o r t t e r m i n a l development.  The c o n c e p t u a l / p l a n n i n g j o i n t  LBICP, c o n s i s t s o f a l l f i v e members based below.  This joint  technical, Beach, West  financial,  California,  Coast  decision,  venture  and i t s c o m p e t i t i v e  terminal  sites.  t h e subset  of  joint  Crowley  concerned  with  venture,  Pacific  Bulk  C.  over  phase  other  potential  leads t o a  Terminals  the terminal f a c i l i t y . Corporation,  i n v e s t i g a t i n g the  o f a t e r m i n a l a t Long  advantages  I f the conceptual  Maritime  M e t r o p o l i t a n Stevedore  The  on s h a r e h o l d i n g t o be o u t l i n e d  and o p e r a t i o n a l f e a s i b i l i t y  c o n s t r u c t , own, and operate consists  i s primarily  venture,  (PBT),  The PBT j o i n t Itoh  and  proceed will  venture  Company,  and  Corporation.  o b j e c t i v e s o f t h e LBICP i n t h e p l a n n i n g and c o n c e p t u a l  stage  a r e as  follows:  (i)  Finalize  f o r m a l o r g a n i z a t i o n o f t h e LBICP j o i n t  (ii)  Through a l e t t e r o f u n d e r s t a n d i n g  (LOU)  4  venture.  s e t f o r t h the i n i t i a l  o b j e c t i v e s and t i m i n g f o r t h e c o n c e p t u a l phase.  (iii)  Complete private  formation companies  o f t h e subset who  will  joint  eventually  venture  by t h e t h r e e  become  the terminal  o p e r a t i n g group.  (iv)  Determine  eg_uity p a r t i c i p a t i o n  o f each  o f the j o i n t  members i n t h e c o n c e p t u a l phase o f t h e p r o j e c t  (106)  venture  and a s s i s t t h e  potential of  (v)  owners i n r e s o l v i n g d i v i s i o n o f t h e i r  shareholdings  t h e T e r m i n a l O p e r a t i n g Company.  Complete a c o n c e p t u a l e n g i n e e r i n g d e s i g n package. must  meet  partner  environmental acceptance,  developed  acceptance,  and f i n a n c i a l  competitiveness  with  criteria  with  operational return.  other  This design  respect  to  cost,  efficiencies,  user  I t must a l s o demonstrate a  potential  U.S.  West  Coast  port  locations.  (vi)  Establish  a  financing  program  c o s t s and minimum p a r t n e r  (vii)  resulting  i n minimum  guarantees.  Complete major a s p e c t s o f the environmental to  the p o i n t t h a t a determination  acceptance  of  the  capital  conceptual  assessment program  can be made r e g a r d i n g the  l o c a t i o n / d e s i g n parameters  and  the f l e x i b i l i t y a l l o w e d i n the f i n a l d e s i g n o f t h e t e r m i n a l .  ( v i i i ) Complete design  criteria,  progress Pacific  a m a r k e t i n g program  t o U.S. Rim  aimed  at providing engineering  o p e r a t i o n a l format, mine owners,  users.  and  agents,  These p o t e n t i a l  general  trading  users w i l l  to  p r o v i d e i n p u t d u r i n g the p l a n n i n g s t a g e .  of  the  letters  terminal of  progress  intent  and  i s an or  throughput.  (107)  other  important  development  companies,  and  be encouraged  Maximum exposure part  commitments  of  securing  for  Terminal  (ix)  E s t a b l i s h a range  of terminal  indicated  t o p o t e n t i a l users  support.  Such  rates  rates  as a b a s i s  t o be p r e d i c a t e d  marketing, engineering,  (x)  throughput  and f i n a n c e  which  can be  f o r securing  upon  inputs  their  from t h e  sub-committees.  Complete t h e above o b j e c t i v e s w i t h i n p r e s c r i b e d f i n a n c i a l and temporal c o n s t r a i n t s .  The  organization  presents  similarities  distribution shall the  be c o n s i d e r e d  production  reality.  operation  behavioral P. B u c k l i n  t o comprise  5  (institutions)  terminal  concept  An examination  of the j o i n t aspects  of  venture  partners  participants  in  says "A c h a n n e l o f d i s t r i b u t i o n  a set of institutions  (functions) u t i l i z e d  draw on channel t h e o r y theory,  Louis  t o consumption".  organizations coal  to  channels.  activities  the  and b e h a v i o r a l  which performs a l l  t o move a p r o d u c t  and i t s t i t l e  from  i n t h e Long Beach p r o j e c t , t h e p a r t i c i p a n t a r e performing (product)  activities  from  conception  of participants i n a large  t o explore  necessary to  joint  t o move  operational  venture  could  a number o f concepts such as r o l e s , r o l e  i n t e r - o r g a n i z a t i o n a l r e l a t i o n s , communications, and c o n f l i c t .  B.  PARTICIPANTS AND'ROLE"  1.  Equity P a r t i c i p a n t s  (a) The P o r t o f Long Beach As  i n d i c a t e d i n Chapter  Port  of  Long  Beach  3, t h e Commissioners  have  a  reputation  (108)  and e x e c u t i v e  f o r aggressively  group o f t h e pursuing  new  projects export for  i n areas t h a t o f f e r  t r a d e from the U.S.  the  port  encourage the West  Coast  terminal  is  a  primarily planning  water  Pedro Bay  In  the  as  a  phase.  of  the  conceptual  construction. major  The  development  The  steam c o a l  c r e a t e d a g r e a t d e a l of i n t e r e s t access  and  rail  l o c a t i o n as the  LBICP  joint  catalyst Their  and  advantages first  large  the  port  venture,  co-ordinator  principle  demonstrated o p e r a t i o n a l and  and  planning  study  in  objective  I t i s hoped these p a r t i c i p a n t companies w i l l  results  terminal such  a San  terminal.  acting  deep  a group o f companies w i t h  strengths. the  The  development o f  conceptual  organize  West Coast has  management.  export  management  l o n g term growth p o t e n t i a l .  to  the  is  financial  be m o t i v a t e d  proceed  with  would  expand  the  Port's  revenue  by the  P o r t o f f i c i a l s would b e n e f i t p o l i t i c a l l y and  to  from  earning  c a p a b i l i t y through wharfage charges l e v i e d a g a i n s t the c o a l tonnage.  If t h i s p r o j e c t represented marketing, undertake  marine, such  a  and  l e s s f i n a n c i a l r i s k , and  operations  project  on  inputs,  i t s own.  In  the  d i d not r e q u i r e major  port  such an  has  the  alternate  ability  to  development  format the P o r t would l e a s e the completed f a c i l i t y on a l o n g term b a s i s t o a stevedore  The  Port's  operator  primary  group.  external  source  exempt c i t y o r p o r t i n d u s t r i a l the a s s e t s and  of  funding  revenue bonds.  i s through the  use  of  These bonds are secured  e a r n i n g a b i l i t y o f the i s s u i n g a u t h o r i t y .  assume under t h i s type of f i n a n c i n g i s r e g u l a t e d by the  Harbour  Bond  Resolution.  limited  to  approximately  Under $100  this  million  (109)  r e s o l u t i o n , the of  by  The maximum debt  the P o r t can  6  tax  Port  is  a d d i t i o n a l borrowing.  1980  presently As  they  have  several  represent  other  their  projects  maximum  under  consideration,  financial  support  s i t u a t i o n i n c r e a s e s p o r t management support developers.  Even  i f the  project  $60-70  for  the  million  would  terminal.  This  f o r the p a r t i c i p a t i n g t e r m i n a l  appeared  extremely  favourable  and  was  supported by a number o f throughput c o n t r a c t s , the P o r t would p r e s e n t l y unable t o secure  The  Port  functions  executive The of  the f i n a n c i n g  port  on  a  director  Commissioners are  independently.  day  to  appointed  consisting other  salaried  day  reporting  to  community  the  resulting financial  has made t h i s an important arm  The  P o r t may  and  development o f the  participation differences disputed  under  Board  the  business  major p u b l i c p o r t s i n the U n i t e d  Long Beach and  a  corporation.  i n d i v i d u a l while  p r i m a r i l y of  basis  of  the  Harbour  The  Executive  i s the  support  success  f o r the  terminal.  regarding  amounts may  will  City  Director i s  leaders.  S t a t e s , the  of the l o c a l  The  are  As  an  Commissioners.  Commissioners  an  appointees case  in  of the P o r t  of  local  communities  governments.  become i n v o l v e d i n some f i n a n c i a l support  principally  d i r e c t i o n of  by the Long Beach C i t y C o u n c i l .  Long Beach i s a m u n i c i p a l  operational  be  o f the  construction  I t appears, however, t h a t i t s f i n a n c i a l involve  disputed  need t o be  efforts  financial  to  mediate major  commitments.  assumed by the P o r t .  Some  partner  of  these  Their preference  is  t o have l i t t l e f i n a n c i a l or o p e r a t i o n a l p a r t i c i p a t i o n i n the p r o j e c t .  In  addition  to  their  role  as  co-ordinator  and  mediator,  the  management i s a l s o p r o v i d i n g m a r k e t i n g c o n t a c t s w i t h western p r o d u c e r s  (110)  Port and  Pacific  Rim  users.  historical  trade  particular  the  These c o n t a c t s a r e c o n s i d e r e d v a l u a b l e as a r e s u l t associations  governments  and  and  trade  principal  development end  users  missions.  in  the  In  Pacific  c o u n t r i e s a t t a c h g r e a t importance t o the a c t i v e p a r t i c i p a t i o n by t h e Executive  and  indication  Commissioner groups.  of  serious  c o n s t r u c t i o n and management convince to  to  the  is  expending  sites  on  undertaking  operate  a  largely  depend  significant  funds  the West Coast.  new  conclude  by  the  the  a conceptual  p r i v a t e group  facility. on  If their  new  The  Port's  coal  export  terminal  p r o j e c t s undertaken by revenues f o r the $26  million  the  conceptual  If  group  a  conceptual  success success  in  the  fiscal  to  the  ending  d e s i g n and  substantially advisors  reduced.  regarding  The  i n t e r f a c i n g w i t h the new  (111)  leads  program  experience  and  interests.  the  more  one  of The  1981  were $41.4  and will of  significant  P o r t ' s g r o s s and million  net and  i n the expenses o f  four m i l l i o n  the P o r t involvement  dollars.  (based on p o r t will  p o r t management would f u n c t i o n as  terminal.  to  in relation  study which  development  a. budget o f  t e c h n i c a l questions  study  finance, construct,  I t i s a 33-1/3% p a r t i c i p a n t  operation c r i t e r i a ) ,  Port  participation  June 30,  T h i s phase has  the  the  represent  an the  securing  P o r t o f Long Beach.  year  respectively. phase.  would  as  program i s s u c c e s s f u l , they  and p l a n n i n g  of  Rim Port  proposing  In essence/  a d e c i s i o n t o c o n t i n u e w i t h c o n s t r u c t i o n i s made by PBT  agreed  or  on  (PBT)  p a r t n e r s t h a t have complementary b u s i n e s s  A  private  o p e r a t i o n o f the t e r m i n a l f a c i l i t y .  c o - o r d i n a t e and  an  for  a p r i v a t e i n v e s t o r group o f the Long Beach p o t e n t i a l  other  will  support  Their p a r t i c i p a t i o n i s regarded  of  i n r e l a t i o n to Port  likely  be  consultants operations  (b) U p l a n d I n d u s t r i e s Upland  Corporation  Industries  subsidiary  (Union  o f Union  Pacific  Pacific  companies.  Corporation)  Corporation.  m i l l i o n i n 1981 i t r e p r e s e n t s operating  Land  With  is a  annual  wholly  revenues  t h e s m a l l e s t d i v i s i o n o f t h e U.P.  owned o f $55  group o f  U.P. c o n s o l i d a t e d income f o r 1981 was $6.38 b i l l i o n .  Upland's i n t e r e s t i n the p r o j e c t r e l a t e s t o t h e i r a b i l i t y t o secure  lease  revenues from the 100 a c r e proposed t e r m i n a l s i t e on t h e N o r t h s i d e o f t h e Cerritos  Channel.  operated  by Champlin  potential support  annual of  interest Pacific  This  land  O i l (another  lease  also  Railroad.  the monopoly r a i l  be  wholly  the s i t e  phase.  stimulated  subsidiary).  certainly  I t appears by  of a d r i l l i n g  owned U.P.  revenues o f $2-5 m i l l i o n  the conceptual  could  i s presently  justify  conceivable  the p o t e n t i a l  that  revenues  field The their their  f o r Union  Based on 15 m i l l i o n tons p e r year throughput, (U.P. i s c a r r i e r ) i t c o u l d mean 500 m i l l i o n  d o l l a r s revenue p e r  year f o r the r a i l r o a d .  After would  the  p r i m a r i l y be  resolving and is  as a l i a i s o n  Upland  Industries' p a r t i c i p a t i o n  and c o n s u l t a n t .  legal/technical/financial  regarded could  rates  The  phase,  problems  They  relating  r e - o r g a n i z a t i o n o f t h e Champlin d r i l l i n g f i e l d s .  link  in  conceptual/planning  by t h e group as a l i n k be important  guidance/information  and t h e r a i l r o a d ' s a t t i t u d e towards s u p p o r t i n g  Long  Beach  extent  versus  and  other  availability  locations presently of this  (112)  assist i n  t o the r e l o c a t i o n  A d d i t i o n a l l y , Upland  t o the Union P a c i f i c  f o r seeking  would  Railroad. on  This  comparative  the terminal  project  on t h e p l a n n i n g  boards.  information  i s presently  unknown.  U p l a n d have i n d i c a t e d of  trade  or  t h a t , due  d i s c r i m i n a t i o n charges,  w i l l i n g t o i n d i c a t e comparative present  The is  to fears of being the  charged  railroad  would  with not  restraint likely  be  r a t e l e v e l s between d i f f e r e n t p o r t s a t the  time.  s e n s i t i v i t y o f the U n i o n P a c i f i c C o r p o r a t i o n t o d i s c r i m i n a t i o n charges important.  Although  supportive  i n d i c a t e d t h a t they cannot i n any  of  possible  them  to  legal  collusion  action  with  p r a c t i c e s with  Long Beach p r o j e c t , they  have  r e s p e c t appear to favour o r support  Long Beach t e r m i n a l over Los Angeles expose  the  o r any o t h e r P o r t as t h i s c o u l d : respect  the  Port  to  restraint  of  the (a)  trade  and  o f Long Beach group; and  (b)  damage t h e i r l o n g term b u s i n e s s r e l a t i o n s h i p s f o r o t h e r cargoes w i t h  other  ports.  I t i s the i n t e n t i o n of the U n i o n P a c i f i c p a r e n t company t o remain  neutral  to  railroad  The of  any  of  the  site  developments t h a t a r e  s e r v e d by i t s  trackage.  Upland group a r e the  terminal  budgeted  s u p p o r t i n g the c o n c e p t u a l  expense.  Along  with  the  p l a n n i n g phase f o r 33-1/3%  Port  they  can  be  considered  c a t a l y s t s i n t r y i n g t o e s t a b l i s h a c o n c e p t u a l p l a n n i n g program which l e a d s the p r i v a t e p a r t i c i p a n t s t o a d e c i s i o n t o proceed w i t h the c o n s t r u c t i o n o f the  terminal.  Upland w i l l  not  participate  i n the  t e r m i n a l ownership  or  operation.  (c) C. C.  I t o h and  Company  I t o h i s Japan's t h i r d  Mitsui.  Their  1981  l a r g e s t t r a d i n g company f o l l o w i n g M i t s u b i s h i and  turnover  was  $28.4 b i l l i o n .  (113)  They s p e c i a l i z e  i n the  trading  of  major  bulk  commodities  Development C o r p o r a t i o n companies  and  assigned  C.  western  coal  the  Itoh  the  Electric  Power  Distribution  trading responsibility They  may  projects that w i l l  Western U n i t e d  petroleum.  The  Japan  (JCDC), on b e h a l f o f the p r i v a t e e l e c t r i c  supply.  infrastructure  including  States  as  Company  i n developing  utility  (EPDC),  the U n i t e d  States and  make steam c o a l s u p p l i e s a v a i l a b l e  from  are  in  have  production  they  participate  Coal  required to  support  the f o r e c a s t  energy needs o f Japan.  C.  Itoh's  initial  acceptance  of  subsequently  verbal  the  as  support  offer  to  of  join  a member o f the  the  p r o j e c t was  the  conceptual  potential  owner and  enhanced study  by  their  phase  o p e r a t i n g group.  I t o h a r e r e g a r d e d by the group as the communications l i n k t o the end in  the  Pacific  Rim  countries.  T h e i r primary  commitments o f tonnage through: Korea; and utilities concept  role  (a) s a l e s e f f o r t s  i s t o secure  cement  companies.  This  latter  This  concept  d i d not  j o i n t venture p a r t i c i p a n t s .  The  o r i g i n a t e w i t h C.  i s t o promote  electric utilities  Itoh or the  and  electric  o f p r i c e s e c u r i t y and p r o t e c t i o n from e x c e s s i v e e s c a l a t i o n  ownership.  users  i n Japan, Taiwan,  approach  C.  l o n g term  (b) d i s t r i b u t i n g t h e i r e q u i t y share among the Japanese and  and  the  through group o f  i n Japan and the Japan  C o a l Development C o r p o r a t i o n have i n d i c a t e d t h e r e i s a need on the p a r t o f the major u s e r s t o p a r t i c i p a t e any be  agreement to becoming an a minimum  tons  per  year  long  term  for a  as owners o f the t e r m i n a l e n t i t y .  equity p a r t i c i p a n t  throughput  10 year  contract  period).  (i.e.  end  u s e r s would  500,000 t o  1,000,000  There are no p l a n s t o o f f e r  p a r t i c i p a t i o n t o u s e r s i n Taiwan o r South Korea.  (114)  from the  Part of  equity  C.  Itoh  They  p r e s e n t l y has  intend  to  own  participation will  a  15%  45% be  interest  of  the  diluted  terminal  a small p a r t i c i p a t i o n  the  of  owners  shareholding. critical  as  Korean, and or  not  The they  and  arm  for  the  and  the  single  phase.  operation.  This  users with  (5-10%) but remaining  carrying  C.  Itoh  as the l i a i s o n f o r  vote  for  this  block  I t o h d u r i n g the c o n c e p t u a l  p l a n n i n g stage i s  are  of  by  aware  years.  project  the  users.  adequate throughput can  early operating  facility  planning  r o l e o f C.  Taiwanese end  the  conceptual  among major Japanese end  maintaining group  i n the  which  tonnage  required  Their information w i l l  be  a n t i c i p a t e d to  They a r e  the  complements  Japanese,  i n d i c a t e whether  s u s t a i n the t e r m i n a l i n  principal their  the  f a r eastern  appointment  as  marketing purchasing  n e g o t i a t o r f o r most o f the Japan r e q u i r e d steaming c o a l .  C.  I t o h has  been appointed  by  JCDC and  the Japanese government t o  assist  i n the  development o f t h e U.S.  West Coast/Japan steam c o a l e x p o r t market.  It  important  themselves  is  projects  which  system.  In  Industries  they offer  this  in  that  they  stake  returns  marginal).  developed f i r s t ,  the  best  context,  significant are  involve  i n making  potential  they  also  are  are  the  terminal for  similar  acting  as  a  Angeles an  or  and i n f r a s t r u c t u r e  improving to  p r o j e c t proceed  I f Los  t h i s would be  in  the  earlier  Participants  discussion were  on  the  (even  logistics and  They  i f the  another West Coast  Port  of  Long  support  Beach  the  have  port  were  f o r C.  of  partners.  development  " s e l l i n g " e f f o r t s t o the o t h e r p a r t i c i p a n t s .  (115)  a  This r e l a t e s to  choice  terminal  Upland  financial  extremely embarrassing s i t u a t i o n  sought t h a t would  a s s i s t the P o r t i n t h e i r  Port  catalyst.  I t o h a f t e r they have committed t o the Long Beach P r o j e c t . the  the  and  (d) Crowley M a r i t i m e Crowley  Corporation  Maritime  company.  Corporation  They c o n c e n t r a t e  construction  this  primarily  i n d u s t r y as an owner  boats, offshore d r i l l i n g for  (CMC)  privately  is a  diversified  on support  o f tugs,  marine  o f t h e o f f s h o r e o i l and  barges,  supply  r i g s , and r e l a t e d marine a s s e t s .  owned  company  operating  boats,  crew  Annual revenue  i s i n the r e g i o n o f 750 m i l l i o n  U.S.  dollars.  The  role  of  management  i n t h e LBICP  capabilities  involvement  they  have  o f many y e a r s .  assist,  Crowley  Company  (another  ownership  details  the  o f t h e s h i p p i n g market.  Their  also  have  LBICP  which of  of the excellent  the Port  participant  operator  with  coal  on stream terminal).  The  a  ship  i n the San Pedro  California  i n 1982  over  lighterage,  Metropolitan  and copper  later  working  o f Long Beach  tug/barge,  i n Stockton,  of a bulk  the Stockton  made  partnership  partner)  i s coming  Stockton  a  related  a result  CMC a r e the p r i n c i p a l  and o p e r a t i o n  Metropolitan,  Stevedore  regarding the  concentrate  loading  (see Chapter  construction  and  3 for  operating  from b e i n g t h e g e n e r a l c o n t r a c t o r p l u s 50% owner  project, this  and  company  their a  excellent  natural  relationship  choice  f o r one  phase  i s 7-1/2%  with  of the  positions.  Crowley's p a r t i c i p a t i o n will  marine  e s t a b l i s h e d with  knowledge CMC has gained on  i s also  to their  c o n s t r u c t i o n , s h i p y a r d , and t o u r boat  basin.  facility  i s primarily  and knowledge  i n the p r o j e c t  relationship period  CMC  maintain  i n the conceptual  study  .  They  between 35 and 45% o f t h e t e r m i n a l ownership and o p e r a t i o n  (116)  (the  final  Metropolitan  share  will  as  splitting  to  be  set the  after 55%  negotiations  American  between  interest  in  CMC  the  and  terminal  ownership).  Crowley have a c t e d as the marine c o n s u l t a n t to  ocean  efforts  shipping involved  rates  and  as  considerable  part  of  ( a l o n g w i t h C.  the  interest  which  in  would  the  purchase  service  the  this  trade  may  require  CMC  dedicated  super  established  in  the  term  long  West Coast s u p p l i e r s . design  and  At the p r e s e n t  terminal  ownership  and  The  complementary b u s i n e s s  operation  colliers contracts  because  b r i d g e overhead  of  the  clearances  time however, Crowley's r o l e comes  t o t h a t o f a pure i n v e s t o r i n t h i s p r o j e c t .  the  approach  Ships t o s e r v i c e  construction  low power c a b l e , and  These  has a d d i t i o n a l l y i n d i c a t e d  of  special  a t the Long Beach s i t e .  team.  operation  the U.S.  narrow approach channels,  closest  and  trade  between the end u s e r s and  survey  time a t Long Beach e v a l u a t i n g the  and b e r t h i n g channels a t the p r o j e c t s i t e . an  marine  Itoh) i n r e g a r d  They a r e l o o k i n g t o  f o r a reasonable  financial  l i n e s i n which they would i n i t i a l l y be  return. involved  are minimal.  This  role  conceptual  has  turned  development  Stevedore which w i l l biased  by  functioning  out  as  motivations complementary  an  do  very  Other  discussed  which  a  partners  i n the  not  important  next  stem or  resultant  from  (117)  of  the  project  Metropolitan  s e c t i o n ) c o u l d p o s s i b l y be  necessarily  partially  part  (including  relate  independent p r o f i t making e n t i t y .  could to  be  phase.  be  objectives  to  from  business  the  terminal  to  The  the  other  lines  terminal partners'  which  operation  per  are se.  Considering subsidize  the  terminal  low  in  this  profitability  complementary  on  context the  may  enable  terminal  them  from  to  other  cross-  profitable  business.  (e) M e t r o p o l i t a n Stevedore Company Metropolitan located  Stevedore  Company  is  a  i n Wilmington, C a l i f o r n i a .  Northern  California  l a r g e s t stevedore  (California  privately Along  owned  with  an  stevedore  operator  a s s o c i a t e d company i n  Si B a l l a s t ) i t r e p r e s e n t s  Stevedoring  group on the U n i t e d S t a t e s West  the  Coast.  M e t r o p o l i t a n p r e s e n t l y h a n d l e s a l l major b u l k s out o f Long Beach a t P i e r G and  P i e r 218  f o r soda ash  participation  i n the  and  o t h e r white b u l k s  LBICP i s based  on:  (a) t h e i r  performance i n the s t e v e d o r i n g of b u l k cargoes (b) t h e i r  o p e r a t i o n a l experience  f o r t h e i r support all  under a r e c e n t l y s i g n e d Under  cargoes costs As  the  being  this  agreement  presently  to  hold  t u r n over  resolve this  facility.  and  (c) the  Metropolitan presently  an  maintain agreed  f o r the t o be on  assignment  the  right  tariff  Port  to  need  operate  The p a r t i c i p a n t s i n LBICP and PBT  (118)  The  a l l bulk  equipment.  Metropolitan  to c o a l products six final  the  including lease  supplied terminal  f o r the  issue with Metropolitan.  handle  schedule  stream i n 1985,  loading rights  preferential  c o n t r a c t w i t h the p o r t . to  on  t e r m i n a l i s planned  asked  f o r the P o r t o f Long Beach;  i n manpower p l a n n i n g ;  they  e s c a l a t i o n schedules  new  of e x c e l l e n t  10 y e a r p r e f e r e n t i a l assignment agreement w i t h  a t Long Beach based  and  history  Their  t o meet the P o r t o f Long Beach o b j e c t i v e o f t r a n s f e r r i n g  c o a l from P i e r G t o the new  Port.  (see Chapter 3 ) .  f o r which years  of  are they  their  have undertaken  l i k e l y approach w i l l  be  to  compensate M e t r o p o l i t a n  f o r t h e l o s s o f p r o f i t s on t h e P i e r G a n t i c i p a t e d  c o a l cargoes i n excess o f those p r o f i t s they w i l l make as a p a r t i c i p a n t i n the new t e r m i n a l e n t i t y . and  represents  a  T h i s i s an extremely d i f f i c u l t i s s u e t o r e s o l v e  major  source  M e t r o p o l i t a n , and the o t h e r  The  size of Metropolitan  revenue) p r e v e n t s  phase  disagreement  (approximately  them from  i s 7-1/2%  owner o f t h e t e r m i n a l  International  the  Port,  taking Their  100 m i l l i o n U.S. d o l l a r s p e r year  a major  and t h e i r  entity,  equity  participation  Metropolitan  will  i n the  conceptual  i n t h e ownership and  10% t o 20%.  Longshoremans and Warehouseman Union  day-to-day t e r m i n a l o p e r a t i o n .  participation  i n t h e LBICP  participation  o p e r a t i o n o f t h e t e r m i n a l w i l l be l i k e l y an  between  partners.  ownership o f t h e t e r m i n a l . planning  of  In a d d i t i o n t o b e i n g provide  c o n t r a c t and  (ILWU) l a b o u r  f o r the  The t e r m i n a l o p e r a t i o n s management w i l l be  by a PBT management b o a r d .  Metropolitan's the  principal  engineering  trade-offs critical  designs  role  i n terms o f manpower  between c a p i t a l  i n developing  i n the conceptual  and l a b o u r  the t e r m i n a l  combine s t a t e o f t h e a r t technology Coast stevedore  criteria.  severe  at  company  The  point  differences  requirements  costs.  This  design.  and recommend  involvement has been  The o b j e c t i v e has been t o  w i t h t h e background knowledge o f West  of opinion  i n the planning  had t o be r e t a i n e d .  which c l a i m e d  has been t o a s s e s s  p r a c t i s e s as they r e l a t e t o l a b o u r i n t e n s i t y f o r d i f f e r e n t  design  one  stage  Bechtel  stage  on t h i s  that  a  issue  second  and M e t r o p o l i t a n  so  engineering  each had  t o be more o p e r a t i o n a l l y and l a b o u r e f f i c i e n t .  (119)  became  designs  As o p e r a t i n g  costs the  represent project  an  escalating  maximizes  the  component, i t i s extremely trade-off  benefits  important  that  capital  and  between  anticipated operating costs.  An  illustration  participant to  the  have  in  to  negotiate  of  having  a  stevedore  t h a t they  recommended t h a t no  to  assistance  their  criteria. the  Apparently, Union  will  on  i f brought  make  every  and  other  present the  to  manning  for  the  labour  boards  project.  levels  i n very  effort  used  when  The  as  to  a  project  comes used  the  i n the  press  for  they  to b u i l d it  for  early  Additionally,  m a t e r i a l s which c o u l d be various  operator  approaches be made  manning  i s unnecessarily labour-intensive.  drawings  defense  fact  process,  which  importance  regard  design  development design  the  i s the  ILWU  different  of  a  will  a  solid  time  to  primarily  M e t r o p o l i t a n generated manning l e v e l s w i t h some f u r t h e r i n v e s t i g a t i o n done by  NYK  Line  provide  of  support  Japan  at  the  request  of  C.  Itoh.  NYK's e f f o r t s were t o  t h a t M e t r o p o l i t a n were making r e a s o n a b l e  assumptions f o r  the c o n c e p t u a l o p e r a t i n g a l t e r n a t i v e s .  2.  Contractor'Participants  (a) E n g i n e e r i n g Bechtel  Civil  develop  a  and  Minerals Division  conceptual  design  secured  including  a contract with  detailed  engineering  specifications.  This  i n f o r m a t i o n u l t i m a t e l y c o u l d be  package.  was  keen  There  competition  for  e n g i n e e r i n g c o n t r a c t o r s such as Soros and Parsons,  and Morrison-Knudsen.  The  this  work  the LBICP t o drawings  r e l e a s e d as from  other  A s s o c i a t e s , Dravo, F l u o r ,  and  a bid major Ralph  e n g i n e e r i n g c o n s u l t a n t i s t o develop  (120)  a  " s t a t e o f t h e a r t " t e r m i n a l s u b j e c t t o t h e f o l l o w i n g major c o n s t r a i n t s :  (i)  C o n c e p t u a l e n g i n e e r i n g c o s t s a r e n o t t o exceed $ 1 . 6 m i l l i o n .  (ii)  The t e r m i n a l l o c a t i o n i s on an o p e r a t i n g o i l f i e l d which need t o be r e d r i l l e d , moved t o d r i l l i n g to  additional  storage  areas  will  i s l a n d s , and r e - p i p e d  without  major  production  interruptions.  (iii)  The s i t e , oil  100 a c r e s  operation,  efficient  less  30 a c r e s r e q u i r e d f o r t h e c o n t i n u i n g  i s minimal  design  to  and  meet  the  will  require  minimum  an  700,000  extremely  metric  ton  s t o r a g e requirement f o r Phase I .  (iv)  The  site  result  i s characterized  of  the  continued  already  been  as much  planned  coal  storage  re-injection forecast does  into  a  h i s t o r y o f subsidence  o i l removal.  as 8-10  The  f e e t i n some s e c t i o n s .  the o i l w e l l s  will  t o ensure  affect  as a  subsidence  o f 700,0001,000,000 m e t r i c  and monitored  not adversely  by  need  that  tons,  t o be  has With  water  accurately  a d d i t i o n a l subsidence  the tunnels,  reclaim  systems  and  conveyor r o u t e s .  (v)  The t e r m i n a l exceed  the  site  and o p e r a t i o n  environmental  must be designed pollution  t o meet o r  regulations  and  r e q u i r e m e n t s i n e f f e c t i n t h e San Pedro B a s i n .  (vi)  The c o n c e p t u a l with  d e s i g n must be f o r m u l a t e d  Metropolitan  Stevedore.  (121)  The  on a n e g o t i a t e d full  benefit  basis of  Metropolitan's  labour  knowledge and e x p e r i e n c e  must be taken  i n t o account i n d e s i g n i n g a l l phases o f t h e o p e r a t i o n .  (vii)  Certain  minimum  throughput  quantities  p e r hour  and  equipment requirements were s e t by t h e e n g i n e e r i n g i n c l u d i n g but n o t l i m i t e d t o : dump w i t h holding  indexer;  a  50-cars;  100-car  (b) 1 complete r a i l unit  (c) s t a c k i n g  10,000-12,000  (a) a t l e a s t  tons  per  train  and  with  reclaiming  hour  with  committee  1 dual r o t a r y c a r  loop  a  track  siding  capable o f  f o r an  a t a minimum  at  minimum  least  two  extra  rate  units  of and  p r e f e r a b l y more; and (d) s h i p l o a d i n g a t 10,000-12,000 t o n s p e r hour w i t h a t l e a s t 2 s h i p l o a d e r s and p r e f e r a b l y more.  ( v i i i ) The t e r m i n a l  capital  cost  should  not exceed  $180 m i l l i o n ( i n  1982 d o l l a r s ) .  During  the  conceptual  phase  engineering  Bechtel  will  be  i n v e s t i g a t i n g t h e f o l l o w i n g major areas o f development:^  (i)  Design -  Criteria  L a t e s t t e c h n o l o g y automation Degree o f s t a n d a r d i z a t i o n Plant cleanliness Maintainability System s i m p l i c i t y , f l e x i b i l i t y , and a v a i l a b i l i t y  (ii)  Preliminary  design  (iii)  M a t e r i a l flow diagrams  (iv)  Operations  (v)  Major equipment  simulation list  (122)  primarily  (vi)  Major s i n g l e l i n e diagrams  (vii)  General arrangement layouts, a l t e r n a t i v e s as r e q u i r e d t o support  ( v i i i ) Preparation drawings. (ix)  of a report i n c l u d i n g cost estimate,  number  Bechtel would  with  the f i n a l  contract). would  allow  the  according  to  consumed  plus  Under  provide  equipment d e s i g n  this  overall  greatest  concept  c o n s t r u c t i o n and  project  attention  ( a r c h i t e c t and e n g i n e e r i n g  (which  i s basically  management.  t o be  They  focused  on  cost  plus)  indicate  this  compliance  with  c r i t e r i a and s p e c i f i c a t i o n s . They would submit a b i l l i n g  actual an  manpower  agreed  used,  level  of  subcontractor profit  responsibilities:  (i)  Initial  (ii)  Engineering  (iii)  Procurement  contractors  studies.  - Purchasing - Inspection - Expediting - T r a f f i c and m a t e r i a l l o g i s t i c s - Contract administration (iv)  and  T h e i r p r i n c i p a l recommendation was t h a t  be r e t a i n e d on an A & E c o n t r a c t b a s i s  services  schedule,  e n g i n e e r i n g work B e c h t e l recommended  of a l t e r n a t i v e s f o r proceeding  development phase o f t h e p r o j e c t . Bechtel  and  B a s i s f o r environmental p e r m i t t i n g .  D u r i n g the course o f t h e i r c o n c e p t u a l a  conveyor profiles the f i r m p l o t p l a n .  Construction  (v)  Construction  management  (vi)  Pre-operational t e s t i n g  (123)  costs,  according  to  and  materials  the  following  (vii)  Start  (viii)  Operations  (ix)  With t h i s  up  Financing services.  system, once the  developers,  Bechtel  would  c o n s t r u c t i o n management. and  running  the  specifications  most  and  take  over  the  t e r m i n a l owners.  efficient  method  requirements.  been approved by  final  The  partners  argued t h a t  maintaining in  p r o j e c t LBICP and  used.  They  quotations  will  from  level PBT  PBT  likely  major  proceed  on  engineering  the  the  companies  of  asking  according  to  this  that  this  not  be  specifications.  A & E concept  basis  up  exacting  felt  of c o s t s as w i t h adherence t o groups d e c i d e d  and  a completely  I t can be of  the  engineering,  r e l a t e s more t o a government sponsored c o n t r a c t which may  as concerned w i t h the The  d e s i g n c r i t e r i a had  They would b a s i c a l l y hand over  t e r m i n a l t o the  represents  concept  final  would not for a  be  lump  sum  Design  and  Construct contract.  With  a  Design  and  Construct  concept,  r e l e a s e f o r m a l Request For P r o p o s a l p r o j e c t Engineer.  the  (RFP)  Engineering  Sub-Committee would  packages developed  by B e c h t e l  These packages would i n c l u d e the f o l l o w i n g :  (i)  Instructions to Bidders.  (ii)  Information  (iii)  Agreement Form.  (iv)  P r o j e c t General  (v)  Project Special Conditions.  (vi)  P r i c i n g and C o n t r a c t  for Bidders.  Conditions.  Data.  (124)  8  as  The  (vii)  Equipment T e c h n i c a l  (viii)  Scope o f Work and  RFP  would  interested  include  contractors  financially  secure  Specifications.  Drawings.  sufficient to  develop  construction  proposal.  Their  p o s s i b l e with  With  escalation  risk  this  i s shifted  seeking  however, new  has  all  turnkey  such as  allow  replies.  Major Bechtel,  b i d package based  to  request  the  on  for bid  greatest  extent  on items they f e l t were beyond t h e i r  the  majority  of  Contractor.  the  The  these  engineering  major  opportunities.  construction  In b e t t e r  this basis.  of  to  Dravo, F l u o r ,  lump sum  non-escalating  the  respects  i n response t o the  allowed  to  b i d on most  business  be  concept  c o n t r a c t o r s would not slump,  would  some e x c e p t i o n s  control.  submit a  specifications  costs  in  all-inclusive  companies  P a r s o n s , Morrison-Knudsen, would equipment drawings and  detail  present  They have  economic  cost times  worldwide economic firms  sizeable  aggressively  staffs  that  are  p r e s e n t l y under u t i l i z e d .  A l t h o u g h the c o s t o f r e s p o n d i n g t o a p r o j e c t o f  this  range  magnitude  i s i n the  market  situation  allows  labour  costs  sunk  The  are  developers  expect  and to  of  $250,000 t o  companies the find  to  other  $1,000,000, t h i s  undertake  costs  of  the  response  preparation  a number o f w i l l i n g  are  contractors  present as  their  not  high.  to b i d  on  this basis.  There w i l l  l i k e l y be need f o r a s m a l l e n g i n e e r i n g  partner  companies) t o oversee the  project  proceed  ensure the  to  completion).  contractor  design A  i s meeting the  and  group ( l i k e l y one  construct  c l o s e watch w i l l  basis  need  to  equipment s p e c i f i c a t i o n  (125)  of  the  (should  the  be  kept  to  requirements  and  design c r i t e r i a .  These r e l a t e v e r y i m p o r t a n t l y t o t h e  environmental  and o p e r a t i o n a l a s p e c t s o f t h e t e r m i n a l development.  (b) E n v i r o n m e n t a l The and  project  Permitting r e t a i n e d E n v i r o - s p h e r e Ebasco as t h e environmental  processor  aspects  of  of  the  the  permitting  introducing  state  agencies.  I f these  elucidated the  environmental  of  a r t operations  new  technologies  impact  may be i n a d e q u a t e .  delays  The  critical  as  technology  and  designs  environmental  the  project  is  t o the p e r m i t t i n g are not  completely  consultant a t the outset o f the p r o j e c t ,  report/environmental  The p r o j e c t may then  p e r m i t t i n g , o r encounter Such  are  the  t o the environmental  environmental  stages.  process  applications.  consultant  impact  either  statement  fail  (EIR/EIS)  to achieve  initial  i n t e r m i n a b l e d e l a y s a t a number o f t h e p e r m i t t i n g  c o u l d e v e n t u a l l y consume a l l a v a i l a b l e  development  funds and time a l l o c a t e d f o r t h e p r o j e c t .  E n v i r o - s p h e r e has i n d i c a t e d they e n v i s i o n t h e EIR/EIS n o t o n l y as a l e g a l requirement  b u t more g e n e r a l l y as a p l a n n i n g t o o l .  p r o j e c t d e v e l o p e r s i n s t r u c t u r i n g the f i n a l minimum  environmental  documents may continue  also  to provide  cost.  provide  If  a data  guidance  the  California  in  a  and impact  timely analysis  f o r m i t i g a t i o n s t h a t would  s u p p l y agreements and subsequently proposed  E n v i r o - s p h e r e has brought  d e s i g n f o r maximum b e n e f i t a t  completed base  T h i s can a s s i s t t h e  s i t e expansion  manner, which  the  could  condition coal projects.  t o the a t t e n t i o n o f t h e p r o j e c t group t h a t under  Environmental  Q u a l i t y A c t (CEQA), p e r m i t t i n g i n the South  (126)  Coast  Air  Coastal  Basin  and  Commission  Additionally  (i)  i s unique  under  from  Enviro-sphere  has  any  the  authority  other  raised  place  the  A p r o j e c t o f t h i s magnitude has in  (ii)  permitting  a Southern C a l i f o r n i a  It  is  important  significant California people  adverse urban  may  the  receive  not  little  i n the U n i t e d  be  of  to  mitigated  the  permitted.  that  the  when  economic  items:  addressed  demonstrate  impacts  States.  crucial  successfully  EIR/EIS  can  California  been p r e v i o u s l y  environmental  public  the  following  EIR/EIS and  that  of  the  Southern  these  benefit  same  of  the  project.  (iii)  Rail  transportation  corridor  noise,  EIR/EIS w i l l basin  than  and  analysis,  rail  associated  air  directly the  traffic quality  a f f e c t more p e o p l e  entire  population  of  analysis, elements  i n the  some o f  Los  the  rail  in  the  Angeles supplying  States.  (iv)  The  Long Beach  singlesite the  coal  impact. total  (v)  project.  terminal The  linear  multitude  Coal  Terminal  Project  It i s really  project  analysis  transportation  of interconnected  a multiple  generates a  environmental  cannot be  considered  EIR/EIS i n  l a r g e amount o f must  corridor  be which  devoted  offs  design  to  comprises  the a  sites.  c o n t r a c t o r are v i t a l as the economic  f o r t h i s p r o j e c t w i l l be  (127)  that  linear  I n t e r a c t i o n between the environmental c o n s u l t i n g group and engineering  a  the  hinge p o i n t o f any  the  trade-  EIR/EIS.  The  project  mitigated to  The be  general as  must  be  justified  practically.  generate  economically  the  U n l e s s the p r o j e c t can be  sufficient  economic  benefits  anticipated  substantial mitigation  u n l i k e l y be  able to receive permitting  r e s p o n s i b i l i t y and  and  r o l e of  the  to  demonstrated pay  measures, the  for  project  or d e v e l o p e r  environmental  impacts  the will  approval.  consultant  will  follows:  (i)  Assemble  a  including  thorough  description  environmental  of  protection  the  proposed  systems,  project  planning,  and  environmental  data  economic a n a l y s i s . (ii)  Identify,  review,  and  assess  a l l relevent  i n order t o : (a)  Summarize  the  data base,  focusing  p o t e n t i a l l y a f f e c t e d by t h e (b)  I d e n t i f y and  (c)  I d e n t i f y d a t a gaps,  (d)  Identify affect  discuss  and  the  development (iii)  Identify,  terminal  regional  project,  environmental  conduct  areas  and  the  features,  features design of  that  can  subsequent  plans.  describe,  environmental  the  s e n s i t i v e environmental  discuss  project  on  and  concerns  place  in  associated  perspective with  the  Long  project.  (iv)  Recommend m i t i g a t i n g measures.  (v)  Evaluate f e a s i b l e a l t e r n a t i v e plans  (vi)  Discuss other planning  considerations  (128)  a l l potential  including:  Beach  Coal  (a)  p o t e n t i a l g r o w t h - i n d u c i n g impact  (b)  boundary o f the p o t e n t i a l l y a f f e c t e d a r e a  (c)  r e l a t i o n s h i p between  short  term  uses  and  long  term  commitments  of  productivity (d)  irreversible  and  irretrievable  resources  (vii)  (e)  energy consumption  (f)  aesthetics.  F i l e f o r and monitor the completion permits  (c) G e o t e c h n i c a l The  proposed  considerable has  been  f o r the  Corporation).  study  an important  The  consultant  Technology  conceptual  i n terms o f  initial  site  i s located  subsidence due into  the  used  shear  tests  and to  not  by  the  determine  l o c a t i o n s subterranean  major  geotechnical  operating  wells are  (formerly  component  analysis  of  o i l field  how  far  support  operation  The  stability  to  represents  characterized  the  stable  number of  which  can  the  beyond  movements can be  (129)  soil. the  coal  expected.  storage  Water surface  further  It w i l l  by  underground  geotechnical analysis w i l l of  the  c o s t i n g program.  a considerable  o i l field  conditions.  lateral  an  a  Western  t o removal of l a r g e q u a n t i t i e s o f o i l .  waste  vertical  Although  on  A d d i t i o n a l l y , there  d e s t a b i l i z e the s o i l  project i s Ertech  cost, t h i s  elevation.  the  agencies.  element o f the d e s i g n and  reinjected  sumps  environmental  Consultant  geotechnical  Earth  from the r e l e v a n t  of n e c e s s a r y  act  to  determine  also pile  complete surface  There are many p i p e l i n e s r u n n i n g through through  lateral  examination  of  anticipated  and  removal  and  movements the  in  complete  proposed  redrilling  the  soil.  area  to  process  will  quadrant  subterranean  analysis.  This  determine  solutions to  underground water p u m p i n g / r e i n j e c t i o n the  t h i s a r e a which would be  these  primary  include  a  Additionally  along  very  the  for  the  engineering  direct  loads  sumps.  The  should  and  design  be  soil  in  contractor  subsidence  and  be  face  to  will  be  amount  examined i n there  geotechnical  analysis w i l l  samples and the l i n e a r vane shear  (d) F i n a n c i a l The  where  major  the  soil  recommend  areas  and  methods  of  evaluated  f o r the  experience world users.  and  Bank  of  Japan  project.  i n the  the  basis  of  drilling  core  test.  The  f i n a n c i n g of  (IBJ)  has  Bank was  been hired  r e t a i n e d as  the  financial  because o f i t s s i g n i f i c a n t  large coal port  p r o j e c t s throughout  the  i t s consequent c l o s e r e l a t i o n s h i p s w i t h the major Japanese c o a l  IBJ has  financing  on  A l l of  Advisor/Consultant  Industrial  advisor  done  a  input  shear movements which can be  be  is  contained  comparison w i t h a l t e r n a t i v e e n g i n e e r i n g or c o n s t r u c t i o n c o s t s .  the  of  to provide  unstable  also  be  channel.  specifying  relation  can  o i l well  sheet p i l e d o r otherwise  contractor  placed  quadrant  The large  pier  geotechnical consultant w i l l  geotechnical  p r e v e n t i n g the in  o f the  a  effects  equipment which w i l l  d i k e which w i l l need t o be  role  what  problems.  t o p r e v e n t the s o i l from s l o u g h i n g i n t o the harbour  The  requires  affected  been a c t i v e l y i n v o l v e d i n the promotion, development, and  of major mine  and  port  facilities  (130)  in Australia,  South  Africa,  P e o p l e s R e p u b l i c of C h i n a , L a t i n America, and l a r g e data base r e g a r d i n g  the  needs o f the  South America.  They have a  e v e n t u a l u s e r s and  s i g n i f i c a n t c o n t r i b u t i o n towards the p r o j e c t ' s  have made a  progress.  T h e i r r e s p o n s i b i l i t y i s t o develop a d e t a i l e d f i n a n c i a l pro-forma based the  anticipated  expenditures. minimize project  the  construction  development  costs,  and  timing  of  these  They a r e charged w i t h d e v e l o p i n g a l t e r n a t i v e programs which liability  with  and  on  the  exposure o f  lowest  possible  the  p a r t i c i p a n t s while  funding  costs  available  providing i n the  the  present  market.  Once a f i n a n c i a l mix  i s a c c e p t e d by the p r o j e c t d e v e l o p e r s , the  Bank  actively participate  of  Japan  negotiating  (e) O i l F i e l d Champlin  o f c o n t r a c t s w i t h the u l t i m a t e  Oil  (a Union  field  the  on  Pacific  the  project  cooperative.  lease  d r i l l i n g and  There are wells,  the  lending  proposed  it  Champlin  Subsidiary)  securing  of  funds  and  institutions.  appears  1981  revenue  they  22 p r o d u c t i o n  4 water  operations  wells,  source w e l l s ,  site.  have  been  They may  enough t o on the  operate  Although  revenues were 4 b i l l i o n  i s important  production  presently  project  them U.P.'s most i n f l u e n t i a l d i v i s i o n . annual  in  Operator  production assist  will  Industrial  not  risk  less  a major o i l committed  than  totally  d o l l a r s which makes f e e l the  $2-5  interruptions  million to  their  site.  15 water i n j e c t i o n w e l l s ,  8 water d i s p o s a l  a waste water treatment p l a n t , and  (131)  to  numerous  pipelines that  throughout t h e  Champlin  minimum  a r e a which must be moved.  have demanded t h a t these  d i s r u p t i o n to production.  u n i t s be  The  credit  Champlin,  relocating  f o r these  however, have been  improvements  as  they  and  ( f ) Secondary E n g i n e e r i n g Early  in  the  Metropolitan reclaiming between that  Stevedore  the  design  i t was  ability  to  represent  it  was  agreed  had  were  on  and  the  unbudgeted  schedule  by  problems  proposing.  This  with  plans  the  final  the  with  operating partner  development  process  production  the  project  expenditures  operation.  and  Bechtel the  type  d i f f e r e n c e of became so  group, of  coal  opinion  significant  stalling  the  group's  engineering  and  design.  o p i n i o n s a r e g i v e n c o n s i d e r a b l e weight by t h e p a r t n e r s  and  t h a t a second e n g i n e e r i n g c o n t r a c t o r would be h i r e d t o work  w i t h M e t r o p o l i t a n to develop Comparative c o s t s and be  give  make t o t h i s  design  significant  engineer  hampering  Metropolitan's  conceptual  Bechtel  proceed  i n c r e a s e the  absolute  Contractor  engineering  methods  the  redrilling  r e l u c t a n t to  f o r improvements Champlin would not otherwise  major problem i s  moved w i t h  w i l l s u b s t a n t i a l l y improve the f i e l d o p e r a t i o n and potential.  The  evaluated.  The  an a l t e r n a t i v e t o the B e c h t e l r e c l a i m scheme.  environmental Bechtel  impacts between the systems c o u l d  proposal  involved  above  ground  then  combination  s t a c k e r r e c l a i m e r u n i t s w i t h a v e r y l a r g e diameter h i g h speed bucket wheel reclaimer. reclaim  The  f e d by  stock p i l e . manpower; and  Metropolitan  proposal  r o t a r y plow f e e d e r s  and  involved  a completely  underground  g r a v i t y through the bottom of  M e t r o p o l i t a n c l a i m e d t h e i r system s i g n i f i c a n t l y reduced: (2) p o l l u t i o n  effects.  (132)  the (1)  To  assist  Metropolitan  Conveyco  Engineering  specializes  in  i n the of  development o f t h e i r  Covina,  conveyor  and  California  bulk  was  handling  alternative  proposal,  retained.  systems,  Conveyco  and  have  done  c o n s i d e r a b l e p r e v i o u s work f o r M e t r o p o l i t a n and the P o r t o f Long Beach.  W i t h i n v e r y t i g h t time c o n s t r a i n t s , the Metropolitan/Conveyco q u i c k l y and  e x p e r t l y developed.  proposal  The E n g i n e e r i n g Sub-Committee were put i n  the p o s i t i o n o f d e c i d i n g between c o n f l i c t i n g e n g i n e e r i n g d e s i g n s . d i d not want t h e i r d e s i g n r e p u d i a t e d by the e f f o r t s o f a s m a l l and  stevedore  marketability design  group  staff  to  costs  were  company.  This  f o r major  coal terminal  to  include  assist  difficult  to  same time B e c h t e l  which they  costed  impacts were not was  finally  c o u l d have  number  i n defending  p r e s e n t a t i o n B e c h t e l had the  a  of  their  compare.  s e r i o u s impacts on  projects. project  design. Prior  Bechtel  In  to  the  the  completed  a  study  substantially that  on  than  different  there  was  the  enough  engineering their  and  final  their  analysis  The two  difference in  the  Conveyco  their costs.  Metropolitan  the  future  marketing  Metropolitan/  Conveyco.  between  Bechtel  expanded  development  r e v i s e d t h e i r scheme and reduced  s i g n i f i c a n t l y higher  agreed  was  At  alternative environmental  schemes and favour  it  of  the  design  the  B e c h t e l scheme t o proceed w i t h t h e i r program.  (g) Systems To  Consultant  support  developers generate  the  operational  desired important  a  credibility  simulation  model  resultant variables  equipment u t i l i z a t i o n ,  and  of  be  (133)  conceptual  developed.  such  stock-pile size  the  as  ship  This and  model  train  f o r d i f f e r e n t design  would  queues, criteria.  The  responsibility  f o r developing  and  implementing the model  the r e s p o n s i b i l i t i e s o f t h e E n g i n e e r i n g Bechtel engineering  Bechtel  just  completed  expansion o f P i e r G.  model  onto  questions  regarding  Bechtel's  simulation  and  changed  inputs  Angeles.  could  the  the  and  the  Reese-Chambers  inputs.  assumptions  assist  in identifying  Despite  in  the  C e r t a i n designs  areas  where the  This  concerning  some  model, i t  o r equipment  immediately e l i m i n a t e d from c o n s i d e r a t i o n as t h e  would not meet minimum o p e r a t i n g  C.  p a r t of  P o r t o f Long Beach  i n v a l u a b l e management t o o l .  groups c o u l d be  from Los  Bechtel b a s i c a l l y transposed  hardware  an  Inc.  a model f o r the  Bechtel  proved t o be  I t was  within  contract.  r e t a i n e d Reese-Chambers C o n s u l t a n t s  company had the  Sub-Committee.  fell  terminal  particular  design  criteria.  SUMMARY  The  number  and  development problem. the  complexity  r e i n f o r c e the  The  developers  previous  of  the  problems  multi-dimensional  involved aspect  s e c t i o n s have d e s c r i b e d the  in  of  a  subcontracts  i n d i s c i p l i n e s such as e n g i n e e r i n g ,  finance, The  these  developer  presents  were o u t s i d e  an  transportation the  detailed  interesting problem, problems  owner/developers subcontractors  the  are  capabilities  point.  In  any  less  the  resolving  i t i s acceptable for various  of  (and  disciplines. responsible  needed  by  geotechnical,  problems i n each o f  the  This  group.  This  multi-dimensional  necessary) to  for  terminal  transportation  e n v i r o n m e n t a l assessment, and management s c i e n c e . areas  the  subcontract  does not  the  mean  result.  the The  l i k e a l l o t h e r a s p e c t s o f the development, must be managed. (134)  The  management  project  is  of a large  a  succcessfully  terminal  difficult is  a  development o r o t h e r  responsibility.  function  of  the  To  participating increasingly can  in a  project  important.  Considerably  -  In t h e i r " I n t e r n a t i o n a l " S u r v e y Lovell  recorded  greater  that  resources  allocation  to  50-50 p a r t n e r s h i p venture  project  could  partners  the  project  management  As t h e number o f owners  t h e management  structure  becomes  more i n t e r n a l o r g a n i z a t i o n a l  issues  " P a r t i c i p a t i o n by be  amassed  but  on  be  operated  t h e LBICP  as t h e means t o b e s t  program  inputs  a  and  also  partners  encourages  not o n l y a  realistic  of 'real * contributions  rather  arrangement between two p a r t i e s . "  the s i z e number  PBT  joint  accomplish  and scope  envisioned  o f management ventures  the o b j e c t i v e s  and other  management  on  9  A  in this  structures.  decided  from the p a r t i c i p a n t p a r t n e r s .  has f u n c t i o n e d  more  allows  one t h a t f r e q u e n t l y r e s u l t s from a simple  a terminal under  several  the b a s i s  or a r t i f i c i a l  to develop  of the d i f f e r i n g this  MANAGEMENT STRUCTURE  or a minority-majority  i n both  management  well  the  o f B u s i n e s s O p i n i o n and E x p e r i e n c e " , B i v i n s and  of r e s p o n s i b i l i t i e s  than t h e c o n v e n t i o n a l  light  of  transport  o b s t r u c t t h e p r o g r e s s on e x t e r n a l i s s u e s and problems.  PART I I  joint  increases  manage  abilities  i n d i v i d u a l s , and t h e i r o r g a n i z a t i o n a l s t r u c t u r e .  large  The  committee  o f the p r o j e c t i n Comments on how  frameworks which  may  work i n a s i m i l a r s i t u a t i o n w i l l be made a t t h e end o f t h i s s e c t i o n .  Figure  4.1  while Figure  depicts  the o r g a n i z a t i o n a l  structure  f o r t h e LBICP  4.2 i n d i c a t e s t h e j o i n t v e n t u r e s t r u c t u r e f o r PBT.  (135)  joint  venture  In the LBICP  each o f the partner. as  the  committees were made up  As the initial  dated the  7th  P o r t was  Venture (TOE)  and  formally  be  p r i n c i p l e s by  formed.  d i f f e r e n t t h e y w i l l be  As  these  discussed  LONG"BEACH INTERNATIONAL COAL PROJECT  1.  Joint"Committee Letter  Committee  of  consisting  Industries, and  C.  Understanding of  one  This  organizational  structure  7th,  member  from  the  the  A number o f  engineering,  regulations,  and  functional finance,  legal  the  E x e c u t i v e Committee.  The  objective  d e s i g n and  of  planning  the  project  program.  r e s p o n s i b i l i t i e s o f the  are  Joint Entity  significantly  established of  committee  c o n t r o l and  to They  formed  manage  in  established  sub-committees  to  Upland  decide  authority  environmental,  was  Joint  Stevedore Company,  management.  these  a  Long Beach,  sub-committees were a l s o  Each o f  executive  Operating  initially  marketing,  areas.  1981 Port  met  E x e c u t i v e Committee which would have o v e r a l l project.  A Memorandum of  Terminal  Metropolitan  Committee the  the  E x e c u t i v e Committee were as  follows  the an the in  government reported  to  conceptual  A c c o r d i n g t o the L e t t e r o f Understanding  (136)  the  sections.  July  for  (LOU)  J o i n t Committee f o r  ventures  dated  Joint  Understanding  design stage.  joint  Crowley M a r i t i m e C o r p o r a t i o n ,  Itoh.  of  designated  f o r m a l l y e s t a b l i s h e d the PBT  i n separate  A.  The  the  which the  two  a l t e r n a t e from each  t h e i r member was  established  LBICP c o n c e p t u a l and  f o r t h the  one  A Letter  d a t e d September 25th, 1981,  set  would  each committee.  1981,  purpose o f u n d e r t a k i n g the Agreement (MOA)  member and  the p r o j e c t c o - o r d i n a t o r  chairman on of J u l y ,  o f one  the  (i)  To  review  Western solicit  from  time  coal.  To  to  To  commitments from the  review  and  the  identify  and o t h e r P a c i f i c Rim  (ii)  time  projected  and, end  to  demand  the  users  extent  of t h i s  for  U.S.  possible,  c o a l i n Japan  countries.  report  on  the  conditions  of  the  receiving  t e r m i n a l s i n Japan and o t h e r c o u n t r i e s .  (iii)  To  (iv)  r e v i e w and  and  scheduling.  To  search  resources  (v)  advise  To  out  on the d e s i r a b l e v e s s e l s i z e s ,  equipment  obtain  financial  and  commitments  r e q u i r e d to c o n s t r u c t the  a s s i s t and  agreements  advise  to  be  i n developing  concluded  for  the  Terminal.  and  between  completing  the  various  a l l interested  parties  r e l a t e d t o the c o n s t r u c t i o n and o p e r a t i o n o f t h e p r o j e c t .  (vi)  To m o n i t o r , a i d , and t e r m i n a l and  (vii)  To  ensure  relevant  the o b t a i n i n g o f government  that  available  a s s i s t the p r o g r e s s  and  each member of shares  information  with on  the  other the  of the d e s i g n  the  permits.  executive members  economic  of  committee makes  of  the  committee  feasibility  of  the  project.  On b e h a l f o f the p a r t i c i p a n t s , the developing path.  a  This  strategic scheduling  plan. tool  Executive  Included will  (137)  Committee i s r e s p o n s i b l e f o r  in this  assist  in  plan  will  allowing  be  the  a  critical  project  to  accomplish  the o b j e c t i v e s of determining  the f e a s i b i l i t y  l o c a t i o n w i t h i n the time and budget c o n s t r a i n t s . will  meet  these  at least  meetings  q u a r t e r l y and  they  will  on  resolve  an  major  of t h i s  The E x e c u t i v e  Committee  ad hoc b a s i s as n e c e s s a r y . conflicts  i n any  of  the  committees and make d e c i s i o n s r e g a r d i n g the development i s s u e s . this  committee  maintaining  2.  is  on  a  majority  basis  To f a c i l i t a t e  the  Port  of  sub-  Voting i n Long  Beach  Committee  the day-to-day d e c i s i o n making r e q u i r e d t o support  committees, t h e E x e c u t i v e Committee an o p e r a t i n g arm. of  with  At  a t i e break v o t e .  J o i n t Co-ordinators o f the Executive  Port  terminal  Long  the sub-  e s t a b l i s h e d two j o i n t c o - o r d i n a t o r s as  One o f t h e j o i n t c o - o r d i n a t o r s i s a Commissioner o f the  Beach,  and  the other  is a  senior  executive  of  C.  Itoh  &  Company i n Japan.  The  major  responsibilities  the  activities  on s c h e d u l e . committees  o f the j o i n t  co-ordinators  are to  coordinate  o f t h e committees i n an manner t h a t p r o j e c t g o a l s a r e met They a l s o must f e r r e t  and  individual  out the problems and concerns o f t h e  p a r t i c i p a n t s as  they  relate  to  the p r o j e c t .  Problems must be r e s o l v e d q u i c k l y t o a v o i d d e l a y s t o the time schedule s e t by the E x e c u t i v e in  pressure  Committee.  A d d i t i o n a l l y , they  p o i n t s or b o t t l e n e c k s  have a u t h o r i t y t o  i n the development program  f o l l o w i n g means:  (i)  A p p l y i n g e x t r a r e s o u r c e s when r e q u i r e d .  (138)  assist  through the  (ii)  Dealing  directly  with  one  o r more p a r t n e r s  confidential  matters  relating  where  need  be  items  to  to  the  negotiated  on  individual  p r o j e c t and/or the  outside  of  the  and Port  committee  process.  (iii)  Initiating  alternative  f i n a n c i a l areas)  investigations  (principally  o u t s i d e o f the committee purview i n an  in  the  effort  t o improve the o v e r a l l c o s t o f f i n a n c i n g f o r the p r o j e c t .  3.  Engineering  The  Sub-Committee  E n g i n e e r i n g Sub-Committee had  major  engineering  concentrated  and  on  I t was  important  environmental,  geotechnical  managing  e n g i n e e r i n g work.  initial  and  sub-contractors.  monitoring  S i g n i f i c a n t a t t e n t i o n was  and  Engineering  operating  costs  examination The  inputs  other  months.  schedule. The  respect  Activities  progress  to  has  and  marketing,  and the needs o f the f i n a l  terminal  design.  the E n g i n e e r i n g the  terminal  This and  was  users.  a t the involved  included  capital  Sub-Committee t o  conceptual  design,  costs. provide capital  time o f t h i s w r i t i n g have spanned significant  Committee. (139)  an  the c o n s t r u c t i o n  d i f f e r e n c e s between  p a r t n e r s which were u l t i m a t e l y a r b i t r a t e d by e i t h e r the j o i n t o r the E x e c u t i v e  design  a l s o a s s i g n e d the t a s k o f e s t i m a t i n g the  recommended  Committee expected with  then  sub-committees t o ensure the t e r m i n a l d e s i g n  Sub-Committee was f o r the  the  p a i d to the c o s t parameters.  c o s t s , o p e r a t i n g c o s t s , b i d and c o n s t r u c t i o n p r o c e s s , and timing  Committee  conceptual  o f the p o t e n t i a l t r a d e - o f f s between l a b o u r  Executive  major  the  The  t h a t t h i s committee draw i n f o r m a t i o n from the  c o n s i s t e n t w i t h r e g u l a t o r y requirements  The  responsibility for selecting  12 the  coordinators  Finance Sub-Committee  The  objective  of  the  package  which  partner  liability.  through  which  Finance  represents  the  Sub-Committee  the  The  least  committee  project  variables and  A  sensitivity  such as  throughput  outlining  the  different  the  advisor  schemes.  analysis  forecast  charges.  to  basically  financial  presents a l t e r n a t i v e financing developed.  cost  i s to  recommend  a  developers  is  a  financial  with  reporting  minimum  mechanism  ( I n d u s t r i a l Bank o f  Japan)  A base case cash f l o w model  was  performed  on  critical  project  tonnages, c a p i t a l c o s t s , o p e r a t i n g  IBJ  and  the  Committee  levels  of  equity  also  prepared  participation  was  costs,  proposals  and  ownership  alternatives.  Although LBICP,  the  sub-committees  their  final  recommendations  management committee. the  PBT  partners  report  who  I f the  to also  the  Executive  need  to  be  Committee  approved  by  p r o j e c t proceeds t o c o n s t r u c t i o n  assume f i n a n c i a l and  operating  of  the  the  PBT  i t will  responsibility for  be the  terminal.  Marketing"Sub-Committee  The  Marketing  for  terminal  Sub-Committee services  been r e l a t i v e l y major  opportunity  to  i n the  i n a c t i v e as  marketing be  study would r e p o r t  i s responsible  study. directly  United PBT  was  This  and  i n v e s t i g a t i n g the Japan.  allocated project  would  involved  through the  States  for  in  give the  the  The  Committee  has  funds t o complete a  private  partners  market assessment.  M a r k e t i n g Sub-Committee.  (140)  market  PBT  and  The the  an PBT Sub-  Committee  also  information plans  used  the p a r t i c i p a n t  concerning  on t h e West  potential  Coast.  partners  competing  sources  terminals  to  with  secure  development  A l l p r e s e n t a t i o n s t o the E x e c u t i v e  were made by PBT as an arm o f t h e M a r k e t i n g  6.  as  Committee  Sub-Committee.  Environmental~sub-Committee  The p r i m a r y assignment an  environmental  completing  consultant.  the environmental,  finalize  the  Statement  (EIR/EIS).  permitting under  Environmental With  activities,  The c o n s u l t a n t would social,  and p o l i t i c a l  Impact  Report  has  permitting hearings  had  the other  and/or  level  significant  processes  f o r other  announcements  of benefits  and  Envirosphere-Ebasco  the auspices o f the Port  group  the  o f t h i s sub-committee was t o secure t h e s e r v i c e s o f be r e s p o n s i b l e f o r analysis required to Environmental  retained  functions of this  t o complete t h e  committee  P l a n n i n g and Environmental  experience projects. and/or  in  "managing"  This  that  public  indicating  the a n t i c i p a t e d  p r o j e c t and how any adverse e n v i r o n m e n t a l a f f e c t s w i l l be m i t i g a t e d . group  will  matters  also  use t h e i r  done  environmental  a r e made  a c h i e v e d by t h e community through  were  Group.  I t i s important  advertisements  Impact  This  data base and c o n s i d e r a b l e e x p e r i e n c e i n these  t o make recommendations t o the E x e c u t i v e Committee on a p p r o p r i a t e  t r a d e - o f f s between environment  related capital  expenses and d e s i g n change  costs.  Timing was i m p o r t a n t i n a l l committees due t o the c o n s t r a i n t s  established  by t h e s c h e d u l i n g program.  There were a d d i t i o n a l urgent time p r e s s u r e s i n  the  as  environmental  group  major  (141)  Federal  and  State  changes  are  contemplated i n the e n v i r o n m e n t a l p e r m i t t i n g p r o c e d u r e .  The major concern  r e l a t e s t o a New  13.  as  initiated  Source Review Act change i n R e g u l a t i o n  by changes i n the  stationery  pollutant  s h i p s , and  other  these  transit  pollution.  If  the  to  A i r A c t , would r e q u i r e a t e r m i n a l  include  are  not  the  p o l l u t i o n l i m i t s i n the could  chance t h a t the  be  in  project  the  measuring  filed  by  August be  1st,  Presently  the  considerably  or  railroad,  process.  terminal  i n excess  Southern C a l i f o r n i a San  project could  from complying w i t h the new  from  permitting  included  change would put  process  pollutants  sources i n t h e i r  sources  permit  reasonable  transit  This  the a l l o w a b l e  source  Clean  T h i s change,  of  Pedro b a s i n .  1982,  there  "grandfathered"  and  was  a  exempted  r e g u l a t i o n s expected t o go i n t o e f f e c t l a t e i n  1982.  7.  Legal'Sub-Committee  The the  Legal  Sub-Committee  joint  venture  authorized,  was  p r i m a r i l y charged  documents  signed,  and  and  notarized.  participant The  charges o f d i s c r i m i n a t i o n and/or o t h e r the  Port's  would be was  public  status.  determined by the  managed  by  the  Long  f u n c t i o n s f o r the  P o r t on  private  were  liability  partners due  to  As  most  with  developers  legal  of  the  ensuring agreements desired  infringements exogenous  City  Attorney's  a day-to-day b a s i s .  minimal  violation  f u n c t i o n i n g as a member o f the  of  and  related  municipal  group.  (142)  The to  laws  Office.  a l l of  were  to  duly  avoid  any  as a r e s u l t  legal  P o r t as a p u b l i c body, the L e g a l Beach  that  of  requirements Sub-Committee This  office  problems i n v o l v i n g the the  avoidance  relating  to  of the  any Port  The  Legal  determine  Sub-Committee the  corporation. these  8.  legal The  also  worked  with  impacts r e g a r d i n g  the  the  question  a n a l y s i s i n c l u d e d tax and  organization  Finance  legal  Sub-Committee  of partnership  to  versus  i m p l i c a t i o n s o f each o f  types.  Government Affairs"Sub-Committee  This It  Committee  was  was  formed  fairly  with  i n a c t i v e during  the  intention  p a r t i c i p a n t s i n terms o f t h e i r their political have  accurate  and/or  change  timely  that  could  more a m o n i t o r i n g fairly two  Port  the  information affect  national  and  dredging  pays  for  a share  of  user  (where l i t t l e  terminal  resources  of  the  Sacramento  recognized  to  governmental  process  As  phase, the  concerned w i t h  and  the need t o  development.  would ports  be  —  this  was  Committee  met  the  following  This r e l a t e s to  channels and  project  ports.  the  and  dredging  would  maintenance  Bill  Federal  the  dredging  budget.  discriminate  against  Long  i s r e q u i r e d and Under a N a t i o n a l  charges a g a i n s t  (143)  (the  for  dredging)  will  be  User Charge system projects  c o a l which a r e  by A  Beach  capitalized  s u b s i d i z i n g deepening/maintenance  through  fees  There i s a  s t a t u s quo  Customs f e e s t o  charge  a p r o j e c t expense).  other  relating  User Charge C o n t r o v e r s y  Government  Port  the  developers  House t h a t would p r e s e r v e  diverting  the  phase.  Congress:  maintaining in  The  They were p r i n c i p a l l y  major items i n the  The  combining  f u n c t i o n d u r i n g the c o n c e p t u a l  infrequently.  (i)  conceptual/planning  l o b b y i s t s i n Washington and  a c t i o n committees. and  of  the  as the in  estimated  at  50f£  per  ton ' -  (there  0  d i f f e r e n t commodity  (ii)  The  trains  sources  could  and  terminal  be  different  reenactment o f the  Clean  discontinue  considered  would  be  source.  being  counted  This  as  would  part  A i r Act  of  —  as  the  significantly  project's a b i l i t y . t o receive permitting  B.  charges  for  groups).  e x p i r a t i o n and  and  would  Ships transit  stationary impact  the  approval.  PBT"JOINT VENTURE  The  PBT  25th  J o i n t Venture was  of  September  Corporation, agreement the  C.  to  terminal.  1981.  recognizes  create  a  I t i s the  terminal  It  is  ownership  formed the  PBT  will  operating  American. and  CMC  and  e n t i t y would be  The  e n t i t y and  agreement  Metropolitan The  s p e c i f i e s that  would own  purpose o f the  formed, owned, and  t o a number of s e c t i o n s o f the  by  C.  55% t o be  Itoh  divided  agreement was  to  set  operated.  This  was  L e t t e r Of Understanding which  LBICP.  e v e n t u a l l y own  activities  The  s a t i s f a c t o r y u n d e r s t a n d i n g of the p r i n c i p a l s by which the  operating  reference  Stevedore Company.  majority  f i n a l l y between them.  in  Maritime  d e s i r e o f a l l p a r t i e s i n the LBICP t h a t the  as  terminal  Metropolitan  Crowley  proposed  45%  f o r t h a mutually  between  operate the  would own agreed  agreement  the  t h a t these companies have been s e l e c t e d  terminal  be  of PBT,  a Memorandum o f Agreement dated  an  I t o h & Company, and  formally  Port  formed by  will  be  and  operate the  p r i m a r i l y storage  (144)  of  proposed t e r m i n a l . coal  for  transit,  The  terminal  unloading  of  rail  cars,  ships also  and o t h e r be  other  for furnishing  bunkering,  the t e r m i n a l .  services,  modes o f l a n d  and  supply  protection  will  The PBT p a r t n e r s  Of  corporation  so t h i s p o i n t was l e f t  This  was  Agreement  basis  important  The t e r m i n a l  and q u a n t i t y  b o a t s , and o t h e r  Memorandum  on a m a j o r i t y  quality  marine  were  be  to decide  open.  each o f t h e p a r t n e r s . towards  responsibilities  would  C.  the stevedoring  of  the  terminal  of the s i g n i n g upon  a  of the  partnership  or  t h e i n t e r e s t o f t h e American  t h e C. I t o h  majority.  ownership may be d i l u t e d i f shareholdings.  c o n s i s t i n g o f two members  from  A d d i t i o n a l l y i t was agreed t h a t as t h e development the  principally.undertaken and  controls, tug  I t was agreed t h a t v o t i n g would  management o f PBT i s by a committee  proceeds  owners w i l l  services to vessels  part  a t t h e time  unable  to protect  considering  also  Japanese cement and u t i l i t y companies o b t a i n minor  The  and l o a d i n g o f  Environmental p r o t e c t i o n s , c l e a n up s e r v i c e s , s a f e t y  fire  responsibilities.  be  transportation,  forms o f ocean t r a n s p o r t a t i o n .  responsible  services, using  unloading  construction be  shared  by C. I t o h ;  labour  as  and  operation  follows:  stage,  marketing  would  the be  t h e marine a c t i v i t i e s managed by CMC,  a c t i v i t i e s d i r e c t e d by  Metropolitan.  EFFECTIVENESS OF MANAGEMENT STRUCTURES  In  t h e case  structure certain  o f PBT i t appears  will to  be one t h a t  have  p a r t i c i p a n t s given  senior  reasonable  that  t h e Management Committee  can s o l v e major problems.  management  representation  This from  Committee i s each  o f the  the p o s s i b i l i t y o f committing t o share o f a 250 m i l l i o n  (145)  dollar  expense.  eliminated  requirement  as a l l d e c i s i o n s  Committee. already  The  will  The c o n s t r u c t i o n  and o p e r a t i o n  agreed by t h e LBICP members.  the case  o f the l a r g e r  sub-committees  be handled by members  l e s s d i f f i c u l t than t h e c o n c e p t u a l  In  for  Long  will  initially  o f t h e Management  be based  The o p e r a t i n g  is  upon  criteria  management i s u s u a l l y  development management.  Beach  International  Coal  Project  Joint  V e n t u r e , t h e committee management s t r u c t u r e may n o t be the most e f f e c t i v e means o f c o m p l e t i n g process multiple  i s cumbersome a t b e s t .  the  require  schedule on t i m e .  In a l a r g e  p a r t i c i p a n t s , t h e time r e q u i r e d  make d e c i s i o n s for  the d e s i g n / p l a n n i n g  study total  design  phase  participation  committees d u r i n g  of  nature  defined, of  the  with  t o f u n c t i o n and  With t h e o b j e c t i v e s  well each  of this  f o r a committee  can become u n r e a s o n a b l e . and  project  The committee  and budget  i t d i d not n e c e s s a r i l y partners  i n a l l o f the  t h i s phase.  Committee d e c i s i o n s a r e o n l y as good as t h e a b i l i t i e s and a u t h o r i t y o f t h e committee members.  Due t o t h e s i g n i f i c a n t t r a v e l s c h e d u l e s o f most o f t h e  s e n i o r management o f t h e p a r t n e r were a t t e n d e d  by a l t e r n a t e s  major b i n d i n g  decisions.  often  deferred  until  such  o f t h e background  include  qualified  Additionally,  or  time  i n t h e case  as t h e absent  t o t h e problem.  decisions another  were i n some cases n o t p r e p a r e d t o make  T h i s meant t h a t major committee d e c i s i o n s were  informed  communication  who  companies, many o f t h e committee meetings  requiring  meeting o f such  to  Late either  finally  a large  (146)  senior  number  executive responses  could  be  tended  to  considerably  resolve  the  more  problem.  of participants  there  appears need  t o be  to  make  attendance for  "psychology  channel  some  c o u l d be  o f meetings".  contribution questioned.  Each o f the p a r t i c i p a n t s has  otherwise Louis  a n a l y s i s i n d i c a t e s : "The  the  requirement  for  their  Stern i n h i s d i s c u s s i o n of  roles  concepts o f p o s i t i o n s and a s s o c i a t e d  r o l e s a r e b a s i c t o u n d e r s t a n d i n g the r e l a t i o n s h i p s o f members i n a system."''''  A  large  joint  venture  involves roles  of  social  individuals  within  t h e i r r e s p e c t i v e o r g a n i z a t i o n s and r o l e s o f o r g a n i z a t i o n s w i t h i n the venture  system.  a  Often the d i s c u s s i o n  t o p i c s become i n c r e a s i n g l y  joint  complex  and tangents r e p r e s e n t i n g one p a r t i c u l a r p o i n t o f view a r e i n v e s t i g a t e d t o insure  compliance  with  a s p e c t o f t h i s approach directly  a l l the  wishes  of  the  participants.  A  positive  i s t h a t the p a r t i c i p a n t s have an o p p o r t u n i t y t o be  i n v o l v e d i n the d e c i s i o n making p r o c e s s .  Once d e c i s i o n / p r o b l e m  h u r d l e s a r e overcome, t h e development program can c o n t i n u e , c o n f i d e n t t h a t p r o g r e s s i s b e i n g made toward o f t h i s approach  an e v e n t u a l c o n c l u s i o n .  The n e g a t i v e a s p e c t  i s the time r e q u i r e d t o d e a l w i t h a l l p a r t n e r - o r i g i n a t i n g  concerns.  In t h i s p r o j e c t the s i g n i f i c a n t e f f o r t s o f the j o i n t c o - o r d i n a t o r s o f the E x e c u t i v e Committee enhanced the individuals  spent  c o n s i d e r a b l e time  p a r t n e r s r e s o l v i n g problems. committees t o complete development program was desire  to  success o f the committee  continue  on  behind  completion  dates  scenes  with  These  individual  They were s u c c e s s f u l i n m o t i v a t i n g the  sub-  t h e i r a s s i g n e d t a s k s w i t h i n the a l l o w e d t i m e .  The  c o n t i n u a l l y reviewed the  schedule.  p r o j e c t meant t h a t p r e s s r e l e a s e s and task  the  system.  could  not  be  (147)  The  i n l i g h t o f the p a r t i c i p a n t s ' publicity  surrounding  news c o n f e r e n c e s geared delayed.  Departing  to  this  certain  from  the  development producers  schedule  could  and Japanese  result  i n the  end u s e r s .  This  lost  support  support  from  was b e i n g  the  U.S.  aggressively  pursued.  A more e f f e c t i v e s t r u c t u r e f o r t h e c o n c e p t u a l d e s i g n phase o f t h i s p r o j e c t may  have  been  t o a s s i g n one o f t h e p a r t n e r s  o r an independent  outside  e n t i t y ( i . e . B e c h t e l o r s i m i l a r ) w i t h o v e r a l l management o f t h e c o n c e p t u a l design the  phase.  budget  Committee.  The  ' c o n t r a c t o r ' would  and  developmental  The  Executive  f u n c t i o n within the g u i d e l i n e s o f  framework  Committee  established  could  be  by  updated  the  on  Executive  a monthly o r  q u a r t e r l y b a s i s r e g a r d i n g the p r o g r e s s o f t h e management c o n t r a c t o r . would a l l o w t h e i r involvement be  t o minimize  the  design,  analysis  partner  was a v a i l a b l e .  This  t o be f o c u s e d  undertake  specific  the  over-involved affected  by  politically additional  a  pride  difficult  s t r u c t u r e would  and  other  authorship  i n the  investigation  a proposal  final  process.  felt  economic  more  In t h e committee  The f i n a l  to  They c o u l d  warranted  committee  i n technical  o f some o f t h e a r e a s  and  proposal.  they  participant  stages  including  allow the energies o f the  t o making t h e i r d e c i s i o n s .  the development of  The o b j e c t i v e would  financing alternatives,  i n v e s t i g a t i o n s i n areas  executives  during  until  on a n a l y z i n g t h e major  i n f o r m a t i o n o r support p r i o r framework,  involvement  c o n s t r u c t i o n program,  participants then  individual  i n a l l major d e c i s i o n s .  This  members  result  detail.  question  are  can be  I t becomes or  insist  on  which had p r e v i o u s l y been  l a b o r i o u s l y debated i n v a r i o u s sub-committees.  Another  approach  c o n c e p t u a l phase.  may  have  been  f o r the P o r t  t o independently  fund the  The r e s u l t i n g r e p o r t document would then be used as t h e  (148)  basis  of  their  "marketing  organizations.  This  completing  the  operations  format  efforts"  would  conceptual could  have  secure  given  design  have  to  the  study.  been  port  i n the committee d e c i s i o n making  from t h i s  type  more  Their  implemented  necessary  interest  from  flexibility  preferred  without  structure.  various  design  the  The  in and  compromises  recommendation  o f a n a l y s i s would have the p o r t s complete endorsement  and  would be open t o f u r t h e r i n v e s t i g a t i o n s by the p r o s p e c t i v e p a r t n e r s s h o u l d they question p a r t i c u l a r  A well  areas.  defined conceptual  external  technical  s t a g e , which r e q u i r e d a s i g n i f i c a n t  detailed  e n g i n e e r i n g support, c o u l d have p o s s i b l y been  b e t t e r managed than through t h e committee s t r u c t u r e . eventual however,  owners  and  amount o f  operators  involved  in  this  t h e committee management s t r u c t u r e was  The need t o have the phase  was  cumbersome.  important; I t may  have  i n h i b i t e d the l e v e l o f a n a l y s i s r e q u i r e d i n some o f the areas as c o n t i n u a l trade  offs  were  partners. committed majority would  being  Additionally to  between  with  the committee  f o l l o w i n g through  decisions.  have  made  had  investigations  more  In  a  i n areas  they  By b r i n g i n g i n the t h r e e Port also l o s t  decide  to  felt  objectives  contract  different  individual  sensitive  were  action accepting  to their  the  partners  analysis  or  e n t e r i n g the  way.  s e l e c t e d owners  early  i n the c o n c e p t u a l  a great deal of i t s f l e x i b i l i t y .  t h a t t h e y would  the  s t r u c t u r e , the  undertake  were  of  approach, t h e p a r t n e r s  the committee  management  flexibility  p r o j e c t i n a major f i n a n c i a l  the  with  the  not be  interested  (149)  i n pursuing  phase,  The PBT group c o u l d the development and  construction of the terminal  a f t e r the conceptual  design  this  has  biased  time,  the  conceptual  design  identical for  A  PBT  to r e f l e c t  t o the P o r t ' s  significantly  their  desires  desires.  These  and  may  effectively. maximize  may  the  n o t have  been study  venture)  i n which  business  investment  i s a difficult  seek  a  structure  which  partners.  t o a company o r group  organization are well  minimizes  making  place  environment  environment  requirement  and r e p o r t s  than  i s usually  and a h i g h  a  high  partner  joint  degree  characterized  venture.  have been completed.  t o t e c h n i c a l and o p e r a t i o n a l  individual distribution  can become and  need  for  t o the j o i n t o f t r u s t and  multi-participant  degree o f r i s k ,  d i f f e r e n t company committee members  project  the  The management r e s p o n s i b i l i t y  by  circumscribed.  organizational  channels.  problems.  Louis  l i t e r a t u r e on r o l e t h e o r y ,  roles Stern  as  This  avoids  significant there  would diverse  a f t e r t h e major t h e entanglement  be a p p l y i n g  inconsistent  The major o b j e c t i v e s o f aspect  discussed  feels that  committees.  C o n f l i c t i n g and  This  who may  a  otherwise  v i e w p o i n t s c o u l d be s e t t l e d by t h e p a r t i c i p a n t e x e c u t i v e s  criteria  defined ( i . e .  ( i n t e r n a l or external  the p a r t i c i p a n t s  the m u l t i p l e  proposals  t o manage  T h i s type o f management framework i s b e t t e r a b l e t o r e a c t  the d e c i s i o n  be  to  by t h e m u l t i p l e  responsibility.  This  venture  minimize c o s t s , remain on s c h e d u l e , e t c . ) a r e a s o n a b l e  be  would be g i v e n  the  changed  had they been making a c o n c e p t u a l  I f t h e major development o b j e c t i v e s  participation  to  joint  profits,  approach  of  By  t h e purpose o f a t t r a c t i n g a number o f d i v e r s e i n v e s t o r groups.  multiple-partner  not  group  i s completed.  again  relates  to  i n the l i t e r a t u r e  on  "the g r e a t e r  part  o f the  and most e m p i r i c a l s t u d i e s on the s u b j e c t , have  (150)  been  related  t o the r o l e s  of i n d i v i d u a l s within  organizations.  Little  emphasis has been p l a c e d on i n t e r - o r g a n i z a t i o n a l i n t e r p r e t a t i o n s , t h a t i s , organizational required project  to f a c i l i t a t e could  phase.  The  opportunity  The  r o l e s and r e l a t i o n s h i p s among o r g a n i z a t i o n s . " ^  the i n d i v i d u a l and o r g a n i z a t i o n a l r o l e s f o r t h i s  have been s i g n i f i c a n t l y  reduced  management  structure  contractor  f o r more e f f e c t i v e  in  dissolution, executive operate  the  objectives,  or declaration  committee  i n the c o n c e p t u a l could  have  planning  offered  an  planning.  p a r t i c i p a n t s c o u l d always be g i v e n  changes  The time  2  s e c u r i t y t h a t major i s s u e s such as  changes  in  o f dividends  decisions.  i n certain functional  The  capitalization  would  be handled  management  contractor  and t e c h n i c a l areas  s p e c i f i c o b j e c t i v e s , i n s t r u c t i o n s , and c o s t / t i m e  i n which  or  shares,  only  through  would there  only exist  constraints.  Another problem o f t h e m u l t i - p a r t i c i p a n t sub-committees was t h e d i f f i c u l t y in the  controlling scenes  t h e major  lobbying  sub-contractors.  directly  to partners  This  structure invited  behind  by t h e s u b - c o n t r a c t o r s .  This  c o u l d be an e f f e c t i v e means o f c i r c u m v e n t i n g  decisions or d i r e c t i o n s of a  particular  for this  sub-committee.  The  opportunity  would be l e s s under a management c o n t r a c t o r c o n c e p t . partner-supplied  type  of s i t u a t i o n  There would be l e s s  s t a f f i n v o l v e d i n the d e c i s i o n s t o a c t as support  f o r the  sub-contractor.  There  a r e a number  management  o f reasons  frameworks  was  why  one o f t h e p o s s i b l y more  n o t used.  (151)  The f i r s t  o f these  efficient  r e l a t e s t o the  r o l e o f C. U.S.  Itoh.  They were a p p o i n t e d by  Western steam c o a l l o g i s t i c s system.  involvement  to  met.  active  This  ensure  the  diverse  decision stage.  of  objectives  the  one  total  Japanese  being  the  of  the  partners  p a r t i c i p a n t s were a l s o a t the  except  contractor  possibilities development  of  infeasibility  to  Beach  businessmen ability.  methodologies.  drawback  of  business  leaders,  to  separate  joint is  combine the going  a  situation  it  opportunities  is  possible  a management would  Compromises  i f specific  development  contractor.  preclude  could  information  to  the  allow  the  indicated  an  Project  backgrounds,  the  the  and  venture brings  according  and  Lovell  the  opinion  artificial  resources in  in  joint  experience,  function  Bivins  venture,  concerns  OBJECTIVES  Coal  corporations  business  a  even  DIVERSITY OF  different  Their  such  the  the  areas.  International  of  this  compromises.  proceed  i n some  OWNERSHIP ISSUES AND  Long  by  in-committee  phase  same  root of  large business  approach  taken  In  had  avoid  rational  project.  CMC  p a r t i c i p a n t s would want t o  the  the  the  others.  speculate  trying  u s e r s were  p a r t i c i p a n t encourages  to  The  end  f o r committee management o f a l l f u n c t i o n s d u r i n g Each o f  the  Such a p o s i t i o n r e q u i r e d  complementary  The  D.  desires  p a r t i c i p a t i o n by  l e v e l of involvement from  The  JCDC t o a s s i s t i n d e v e l o p i n g  and  nationalities,  to  a  indicate of  uneasy  together  many  wide "the of  range  of  principal  the  atmosphere  and  world's  created  by  management approaches o f a number  same b u s i n e s s  (152)  enterprise."  1 3  They  of  also  indicate  that  objectives  "companies  and  have  firmly  operating procedures,  e s t a b l i s h e d long and  individuals  and  have  l o y a l i t i e s not e a s i l y changed or e f f e c t i v e l y compromised."^ recorded  that  together  complementary  resources c o u l d be also  "in  general  normally  spirit,  and  assemble  resources  comprise  resources other  not  and  the  Traditional  of  of  joint  ventures  those  a  company  The  opportunity  in  offers  foreign  expertise. financial  risks  are  talents  (private  objective w i l l  is  sense  (like  to  put Such  5  that  they  "The them  but  g o o d w i l l , knowhow, team latter  in  are  common  less  easy  i s one  of  formed  government  usually  developing  local  business  primarily  for  the  of a company i n a developed  or  the  investor offers The  They f u r t h e r  4  firms.''^  ( i n the  and  t e c h n i c a l , human r e s o u r c e s  firms  putting  set ideas  venture  existing  range  to the  ventures".^  r e s o u r c e s and  country.  joint  ordinary  assets). of  a  already  only  partner  difficulty  combining of  of  intangible  l i m i t a t i o n s of j o i n t  the  purpose  bought i n the market) f i n a n c i a l ,  acquired  company  the  short  be  in  a  country  less  t o expand or e x p l o i t  country.  Typically,  knowledge and capital  owned)  purpose  an  the  operating  p l u s marketing  and  LBICP group has been formed as a means t o : i n v o l v e d i n a s i g n i f i c a n t p r o j e c t ; and  of with  developed a  business  host  country  license, other  while  technical  (a) spread  the  (b) expand the i n -  house e x p e r t i s e l e v e l through e q u i t y p a r t i c i p a t i o n .  With the e x c e p t i o n o f  CMC,  i n t h i s p r o j e c t as  an  This i s less t y p i c a l  of  a l l o f the p a r t i c i p a n t s view t h e i r  investment  e x t e n s i o n o f t h e i r main stream b u s i n e s s a c t i v i t y .  the i n t e r n a t i o n a l j o i n t v e n t u r e s c h a r a c t e r i s t i c o f one  dominant f i r m .  The  Long  segregation  the  Beach  project  is  further  complicated  (153)  by  the  of  conceptual/planning participants Industries  in  phase and the c o n s t r u c t i o n / o p e r a t i o n phase.  the  with  conceptual  33-1/3%  $250,000,000 t e r m i n a l in  the  study  terminal  phase  each)  will  stage  have  little  expense o r o p e r a t i n g will  be  the major  costs.  two j o i n t v e n t u r e s o p e r a t i n g three  private  objectives.  Port  are complicated  simultaneously,  companies  These may  of  regarding  in Pacific  be d i f f e r e n t  Long  the  Beach  and  construction,  constraints  sub-group PBT.  the  Upland in  the  The minor p a r t i c i p a n t s operators  o f the  Upland  as  To the e x t e n t  from the i n c r e m e n t a l  Bulk  and  part  a subset  of  ventures.  have  land  of  the  represent  investment  of objectives.  been one o f c o o p e r a t i o n  T e r m i n a l s have  partners.  use.  certain They  terminal  constraints need  to  see  development.  s i g n i f i c a n t c o s t s t o be  t h a t PBT does not see any f i n a n c i a l b e n e f i t  non-participating investors  major d i v e r g e n c e  T h i s p r o j e c t has  each w i t h d i f f e r e n t  Industries  operation  considered  enough.  Joint  from the LBICP p r o j e c t as a whole o r  However, a number o f t h e s e items c o u l d  derived  and  participation  f i n a n c i e r s and  the i n d i v i d u a l members o f e i t h e r o f t h e j o i n t  these  port  i s a n e s t i n g o f one j o i n t v e n t u r e w i t h i n a n o t h e r .  ventures with m u l t i p l e partners  The  (the  development.  What has e v o l v e d  The  planning  The major  required  (the P o r t  t o meet the d e s i r e s o f  and U p l a n d ) , t h e r e  i s room f o r  The o p e r a t i o n a l environment, however, has  and c o h e s i o n .  The P o r t wants t o ensure t h a t the  p r i v a t e i n v e s t o r s a r e s a t i s f i e d w i t h the t e r m i n a l development phase t o the extent  they  are motivated  to  invest  phases.  (154)  i n the  construction  and  operation  As  can  be  divergent aspects  expected, as  of  the  items  of  development  these  general  critical  the  of  issues  and  a  views number  proceeds  problem  major areas from the diverging  consensus  the  of  early  and  areas  more  begin  minor  over  issues  the  project  identifiable  to  p a t h i n f i g u r e 4.3 partners  in  surface. provide  time. will  represents  the  be  detailed number  of  good examples o f  There  which  A  become  are  four  discussed  major in  the  following sections.  1.  Oil  well' r e l o c a t i o n  aspect  o f the  among the  terminal  partners  study  indicated  would  cost  15  terminal  this  development and  are most e v i d e n t .  that to  the  20  i n c o n s e q u e n t i a l , was the  —  o i l well  million  The  i n i t i a l Kaiser  dollars.  critical  which d i v e r g e n t  r e l o c a t i o n on  decision.  would e v e n t u a l l y be  resolved  Uplands,  and  Port,  on  most  This  the  views  Engineering  terminal  cost,  site  although  not  not o f a magnitude t h a t would m a t e r i a l l y a f f e c t  development  the  one  single  the  The  in a fair private  participants f e l t  and  that i t  e q u i t a b l e manner between  partners.  As  Bechtel  began  to  f u r t h e r d e f i n e the o i l w e l l r e l o c a t i o n c o s t s , a f t e r c o n s u l t a t i o n w i t h Champlin  O i l , the  dollars.  Bechtel  cost  of  the  program  f u r t h e r i n d i c a t e d there  escalated could  m i l l i o n d o l l a r s o f c o s t s t h a t were a t t h a t time  This  substantial  development  plans.  escalation The  Port  could  and  Upland  interceded  would  private  companies  (155)  from  63  million  additional  10  undefined.  costs  o i l w e l l c o s t s c o u l d be  the  an  in  a s s u r a n c e s t h a t the relieve  be  to  have  stalled to  make  the vague  handled i n a manner t h a t bearing  the  full  cost  burden.  As  indicated  recently  that  as  neither  subsidiaries  could  relocation.  The  June  of  Union  1982,  Pacific  p a r t i c i p a t e i n any reasons  for this  however,  the  Corporation costs  nor  as p a r t  apparent  Upland any  of  group of  the  o i l well  change i n approach  were  the c o s t s would not c o n s t i t u t e a r e a s o n a b l e investment from the o f view o f U.P.  p a r e n t company.  could  be  Beach  terminal.  C.  interpreted  Itoh  would not  the  full  programs. the  well  The  desired  reduced  cutoff their  the p r o j e c t o n l y the Although a  the  o f the  project  activities.  cost  rates  role  p o s s i b i l i t y they could  represents  the  for  CMC  oil  (for  as  well  Long  users  (and  presenting  a l l respects  and  Metropolitan  ready  alternative  63 m i l l i o n d o l l a r o i l  financial  throughput  that  returns.  has  would It  also  problems on t h i s i s s u e f o r Upland and  (156)  not attain  to  indicated  returns  tonnages  advised  yet the  contributes  been  there  the Japanese end  was  a  charge project  accepted,  private to  below  indicated).  i n t e r e s t expense on t h i s c a p i t a l f o r the  this  to  relocation  in  co-ordinator  support  p r o j e c t had  Upland c o s t i n  project  point  the  fund the o i l w e l l r e l o c a t i o n c o s t s and  compromise  financial  the  of  end  t o p a r t i c i p a t e i f the  part  to  favour  p o t e n t i a l Japanese  this  was  in  a n a l y s i s demonstrated t h a t the  corporate in  the  dollars  property  relocation  life.  discrimination  willing  construction  Port  A d d i t i o n a l l y , t h i s type o f  million  They f e l t  financial  their  be  63  leasehold  commence their  U.P.  were i n d i c a t i n g t h a t  partners) bear  as  its  it  companies  resolving users.  the  2.  C a p i t a l costs" versus for  any  the  labour  a  very  from  large project.  costs  —  capital must  West to  Coast  labour  rely  this  is a  critical  stevedoring  union.  t r a d e o f f s must be  heavily  on  the  in  this  input  The  maximum  sought. from  appears s t r a i g h t - f o r w a r d t h e r e a r e  p r o j e c t which have l e d t o d i v e r g e n t  made i t one  The  of the more d i f f i c u l t  participation  based  on  their  government) steam see  coal  the  of  C.  The  the  views  towards  supply  system.  maximum  close  and  working  the  construction  operating  Although t h i s  views on  this topic  of  the  These  system.  (and  reliable  U.S.  West  Coast  interests prefer equipment  C.  Itoh  and  their  that  i s being  indifferent the  as  conceptual  manufactured to  the  origin  design  recommended a l e s s l a b o u r  The in  Japan.  o f the  avoided  consistent Metropolitan  equipment.  major  the  the  with  Bechtel  efforts  to  equipment  Stevedore  were  They p r e f e r r e d t h a t  machinery  components  and  i n t e n s i v e underground r e c l a i m system.  giant stacker/reclaimer Western Europe and  in  form  to  Because o f t h i s d e s i r e and  ensure  was  is  user  i t i s p o s s i b l e t h a t B e c h t e l made r e a s o n a b l e design  Japan  end  same Japanese  r e l a t i o n s h i p between  conceptual  and  Japanese  Japanese manufactured  terminal  Bank o f  Corporation, that  partner  some u n d e r l y i n g f a c t o r s  Industrial  establishing a  amount o f  benefits  to resolve.  representation  major components o f the the  Itoh  when  c o s t s c o n s i s t s o f members from  ( M e t r o p o l i t a n Stevedore) t o reduce the manning l e v e l s . objective  problem  However i t becomes e x t r e m e l y important  component o f the o p e r a t i n g  strong  design  operating  combination u n i t s t y p i c a l  Japan were proposed by (157)  the  of manufacture  Bechtel  conceptual  design.  They  were  strongly  disputed  in  concept  M e t r o p o l i t a n demonstrated t h a t these u n i t s : inventory of  (no  their  standard  size  and  by  Metropolitan.  (a) r e q u i r e d  significant  p a r t s ) ; (b) were much more u n s i g h t l y i n terms noise  components;  (c)  were  environmentally  i n e f f i c i e n t because o f f u g i t i v e dust r a i s e d by the l a r g e bucket wheel r e c l a i m e r ; and flexibility proposal  (d) t h e i r f u n c t i o n a l combination reduced the  of  the  made  preparation sufficient Bechtel  terminal  sense  to  time a l l o w e d time t o  proposed  a l l those  s u b s t a n t i a t e the  system.  The  each  terminal was  nor  arguing  had  and  However,  f o r the  their  ever  operated  abilities  in  short  g i v e them  system v e r s u s  partners  t h a t M e t r o p o l i t a n had  general  the  Conveyco d i d not  cost of t h e i r  problem  Bechtel  about  Metropolitan's  involved.  Metropolitan  i n v o l v e d i n t h i s d i s p u t e was major  considerably.  operating  not  the  directly  never engineered  a major an  terminal  unproven  a  yet  area  of  experience.  3.  Terminal the  pricing  Japanese  terminal port  to  fee  a  be  end  of  on  the  was  terminal metric  with  coast.  advantages i n r e l a t i o n  pressing other  C.  in  the  existing  Itoh  were  need and  1982  the  dollars.  Long Beach s i t e t o the  to  total  was  The  that  Portland  response  coal l o g i s t i c s  the  predicated  proposed  being  —  potential  of  the  developed f o r system  would reduce the d e l i v e r e d p r i c e o f the thermal c o a l t o the  (158)  for  indicating  i n the p r o j e c t would be  charge compared  ton  t h a t the  e x i s t i n g / p o t e n t i a l terminals  continually  users p a r t i c i p a t i o n  $5.00 per partners  was  p r i c e competitive  competitive  other its  partner  developments  potential on  compared w i t h o t h e r  which  Japanese  end  users.  I t was  felt  the  more comparative than the for  the  costs  Japanese  price  may  haul,  there  market 10-15  active  to r a i l  will  argued  be  on  a  reduced  that  larger  large  i s served 1 7  charge or  although tonnage  Different capital  ships  component o f  i n conventional  the  when  ports  a number o f  throughput  and  in  the  between  the  railroads  American  PBT  partners  and  charges. delivered rail  Japanese thermal  coal  (30%  i n next  difference in r a i l  are  no  shorter  panamax v e s s e l s  t h a t the  be  s h i p t o s h i p charge  differences  They f u r t h e r f e e l  competition  charge should  produce d i f f e r e n t t e r m i n a l  e x i s t based  that  be  must  partner  years).  will  rail  to terminal  different origin/destination pairs.  operating The  terminal  a v a i l a b l e and for  these  rates  there  various  is  port  destinations.  At  this  would  point  be  the  unable  to  earn  investment or m i s s i n g the  throughput  constructed project  4.  Diverse  for  charge  equivalent  approximately  objectives"" o f  problems  not  to  1/3  other  of  return  to  terminals  1/2  of  "the " " p a r t i c i p a n t s —  which  i n t e r n a l problems o f the  has  rate  that  the  on  they their  i f they p r i c e d which c o u l d  Cerritos  be  Channel  cost.  minor  groups.  reasonable  concerned  p r o f i t p o t e n t i a l on the t e r m i n a l  ownership"and o p e r a t i o n the  a  were  The will  regarding  the"  problems o u t l i n e d e a r l i e r follow  in  this  paragraph  terminal  and  some o f  relate  j o i n t v e n t u r e s which must be r e s o l v e d by  to the  O u t s i d e o f the v e n t u r e i t s e l f each o f the major p a r t i c i p a n t s  proprietary objectives relating relate  directly  to  a  financial  (159)  to the  terminal  return  from  which may  the  or  throughput  may of  cargo.  As s p e c u l a t i v e examples i t c o u l d be r e a l i s t i c t o c o n s i d e r the  following:  (i)  Upland  Industries  and Champlin  O i l may be w i l l i n g  to  accept  some p o r t i o n o f t h e o i l w e l l r e l o c a t i o n expense and/or reduce their  land lease charges.  proceeding parent rail  (ii)  whereby  T h i s would f a c i l i t a t e  t h e Union  corporation  could  Pacific  earn  and hence the  s u b s t a n t i a l revenues  t r a n s p o r t a t i o n o f the c o a l t o the terminal  from t h e  location.  The P o r t o f Long Beach i s e x t r e m e l y committed t o the t e r m i n a l development.  They may  be w i l l i n g  t o accept  some  financial  burden  ( e s p e c i a l l y i n r e l a t i o n t o the o i l w e l l r e l o c a t i o n ) o r  other  major  project  stumbling  blocks  development o f t h e c o a l t e r m i n a l . revenue  t o the P o r t  f o r the l i f e and  C.  Itoh  States. from  income  generate  t o having  the f i r s t  major  social  West Coast  area.  house, a r e n o t l a r g e  asset  the Western  United  T h e i r o b j e c t i v e may n o t be t o maximize t h e i r  profit  expected  partners  which  satisfied  with  from  coal  sales  i n the t e r m i n a l that  eventually  C. may  Itoh join  from  facility. and  the o t h e r  the  project  I t can be Japanese would  be  a break-even o r m a r g i n a l p r o f i t a b i l i t y f o r the  (160)  q  the  l i k e l y be w i l l i n g t o earn t h e i r revenue on  participation  reasonably  The p r o j e c t w i l l  f a c i l i t y i n t h e Long Beach harbour  They w i l l  trading  facilitate  There a r e a l s o a t t e n d a n t  & Company, as a t r a d i n g  owners. the  benefits  to  20£ and 50ft p e r t o n wharfage  o f between  o f the p r o j e c t .  political  c o a l export  (iii)  Railroad  the terminal  terminal.  T h i s would mean they were g e t t i n g the b e s t  value  their  for  charge  also  assists  Additionally, high,  thermal in  i f the  i t can  be  Japanese end  coal  imports.  their  negotiations  profitability  reasonably  A  of  the  lower with  u s e r s would e x e r t p r e s s u r e  throughput  other  terminal  anticipated that  loading  C.  rose  too  and  the  Itoh  on the PBT  ports.  partnership  t o reduce the r a t e s .  (iv)  Metropolitan  Stevedore  Company  providing  labour  s u p e r v i s i o n f o r the o p e r a t i o n o f  terminal  the  Although s e n i o r t e r m i n a l management w i l l  be  labour  some  profit  already  supervision  cost  components.  could  them  to  liability  allow  versus as  o f the  project.  corporation  the  operating  Japanese end T h i s was  a partnership  the  to  U.S.  primarily  the to  accept  priced  into  These a  the  labour  lesser rate  related of  and  profits  return  on  the  investment.  preferred  capital  —  the  entity. users  opposite  Japanese p a r t n e r They  according t o the  could  entity.  structure,  i n s i s t e d on  then  limit  American p a r t i c i p a n t s  These  a  the  to t h e i r p a r t i c i p a t i o n  i n l i g h t o f the b e n e f i c i a l tax  partnership  d e p r e c i a t i o n allowances. United  for  have  corporation  the  responsible  Metropolitan  Partnership  in  entity.  and  be  a j o i n t v e n t u r e m a t t e r , i t c o u l d be p o s s i b l e t h a t  terminal  5.  the  will  tax  reporting  who  advantages i n  advantages  relate  requirements  A d d i t i o n a l l y , t o form a c o r p o r a t i o n  and i n the  S t a t e s w i t h a f o r e i g n company r e q u i r e s a s i g n i f i c a n t amount o f  data r e p o r t i n g a l l f i n a n c i a l and  o p e r a t i o n a l aspects  (161)  o f the  corporate  shareholders.  This  will  include  a l l the  Japanese  utilities  cement companies t h a t would e v e n t u a l l y become p a r t i c i p a n t s and literally  At  the  time  corporation  discussed  6.  of  this  c o u l d be  i n Chapter  w r i t i n g the  r e s o l v e d through the  The  private of  partners  partners  10%.  towards  Leases would be  would  have  equity  costs  are e s c a l a t i n g , and  materializing. available may  be  to  It the  as an  Return  contributions. the  appears  level  indicated  the  measure financial on  the  the  the  terminal  performance  criteria.  equity  service and  from  the  which  The  bases  of  the  the  a  success.  equity  The  a d d i t i o n a l funds  Presently  the  anticipated.  from any  that  construction  not  participants ownership  and  terminal  Port  and  the  return  project  the  A  have  operation. according  cash  flow  previous different They  to use  also  different a  return  available  to  investment a f t e r i n t e r e s t expense  This  (162)  could  —  Japanese p a r t n e r  on  be  There a d d i t i o n a l l y  e q u i t y "requirements  the  debt.  may  not  lenders.  of  the  financing  of  component  e q u i t y c o n t r i b u t i o n s i f the  e q u i t y p o r t i o n o f the  retirement  project  Japanese  originally  that  equity  Japanese throughput guarantees a r e  on "investment/Return" on  objectives  this  used t o make up  a requirement f o r h i g h e r  section  structure  i n d i c a t i o n o f the m o t i v a t i o n  making  i s t o r e c e i v e f i n a n c i n g support  7.  partnership  financial  were more i n t e r e s t e d i n a s m a l l e r  been  of  P o r t o f Long Beach p r e f e r to see an  component o f a p p r o x i m a t e l y 30% private  question  to  5.  Debt/Equity r a t i o s —  the  would  i n v o l v e t r u c k l o a d s o f i n f o r m a t i o n which c o u l d take y e a r s  provide. versus  and  number,  although  a  reasonable  measure o f the equity, parent  performance o f the  does not  take  i n t o account  companies a c c o r d i n g  Crowley  and  criteria  Metropolitan  (IRR)  project according  to the  the  an  after  rate  interest  and  use  interest on  have chosen  to  a more  their  mobile  financial  criteria  make an  American There  their  companies.  difficult  of  m a j o r i t y vote rates  been  to  hurdle  the  after returns  operating  Regardless  of  a the  a n a l y s i s the p a r t i c i p a n t s  o f whether  in"PBT — to  The  maintain  preliminary  and  they  should  proceed  i n t e n t i o n of a l l p a r t i e s the  terminal  ownership  that  Itoh  agreement  maintain  5%  10%  cement and  utility  Japanese a r e p r e s s i n g f o r the unanimous v o t e  thereby  the  minority  operate.  owners  an  ability  to  veto  a  major  the p o t e n t i a l of making the t e r m i n a l  The  American  a l l o w i n g them the an  of other  of  will  equity  c a r r y i n g the proxy v o t e  to  C.  the  T h i s system has to  are  use  partnership.  partners  has  final  to  Metropolitan  (namely  intensive business.  assessment  ownership  The  any  decision.  set  criteria  Metropolitan  employed, i n the  independent  themselves w h i l e  giving  its ability  i n t e r e s t whereas Crowley  financial  equipment.  margin l a b o u r  share o f the  the  majority. dilute  investment  Crowley t y p i c a l l y have a h i g h e r  Unanimous v e r s u s m a j o r i t y v o t e for  a r e t u r n on  t h i s investment.  flow before  rigorous  marine  thin  is  use  the  project.  component) because they have been a b l e t o earn h i g h  with t h e i r  8.  a cash  analysis.  typically  will  o b l i g a t i o n of  which l o o k s a t the t o t a l investment and  r e t u r n on  invested  l o a n o b l i g a t i o n s f o r the  g e n e r a t e a cash f l o w r e t u r n t o support base t h e i r  financial  t o the  established  partners  ability return  (163)  have  t o operate that  is  insisted  the  very on  terminal  reasonable.  a and  This  protection  has  participating  been  demanded  i n a terminal  due  to  the  lack  .of  p r o j e c t which i s p r i c e d  interest  in  and o p e r a t e d on  the b a s i s o f m a r g i n a l p r o f i t a b i l i t y .  E.  CONCLUSION  The  issues  terminal  involved  i n developing  a management  p r o j e c t a r e many and complex.  structure  The m u l t i - o r g a n i z a t i o n a l  making u n i t s must be a b l e t o overcome problems i n h e r e n t of  t h i s magnitude.  effective proceed  management  towards  To t h e e x t e n t  This w i l l  decision  i n a j o i n t venture  the e x t e r n a l  framework, t h e y w i l l problems.  be a b l e t o  The o p e r a t i o n  i n t e r n a l management s t r u c t u r e can exhaust t h e p e r s o n n e l and time o f t h e group.  major  t h e y a r e s u c c e s s f u l i n implementing an  and communications  resolving  for a  o f the resources  s i g n i f i c a n t l y d e t r a c t from t h e i r a b i l i t y t o c a r r y  out t h e i r development program.  (164)  END NOTES  1. Wolfgang G. Friedmann and George Kalmanoff, Joint"International B u s i n e s s V e n t u r e s , (New York: Columbia U n i v e r s i t y P r e s s , 1961), p . 5. 2.  I b i d . , p . 5.  3. W i l l i a m M. Evan, Toward a"Theory o f I n t e r o r g a n i z a t i o n a l R e l a t i o n s , i n L o u i s W. S t e r n ed., D i s t r i b u t i o n Channels: B e h a v i o r a l Dimensions, ( B o s t o n , Mass.: Houghton M i f f l i n Company, 1969), p . 74. 4. L e t t e r o f U n d e r s t a n d i n g , s i g n e d J u l y 7, 1981 p a r t n e r s , r e p r e s e n t i n g f o r m a l commencement o f t h e p r o j e c t . 5. L o u i s P. B u c k l i n , A Theory o f Channel S t r u c t u r e , W. Stern, Distribution Channels: Behavioral Dimensions, Houghton M i f f l i n Company, 1969), p . 94.  by  the  LBICP  quoted i n L o u i s (Boston, Mass.:  6. Long Beach Harbour Department, 1980 Bond R e s o l u t i o n , " R e s o l u t i o n HD1182", s t i p u l a t e s t h a t a new bond i s s u e cannot be made u n l e s s the n e t p o r t revenues f o r p r e v i o u s 12 months (ending a t l e a s t 90 days p r i o r t o d e l i v e r y o f a d d i t i o n a l b o n d s ) , o r t h e e s t i m a t e d net revenues f o r t h e 12-month p e r i o d b e g i n n i n g when t h e improvements f i n a n c e d by the bonds become o p e r a t i o n a l , must e q u a l a t l e a s t 1.5 t i m e s the maximum combined annual debt s e r v i c e on the o u t s t a n d i n g and a d d i t i o n a l bonds. 7. C o n t r a c t f o r E n g i n e e r i n g S e r v i c e s s i g n e d between B e c h t e l C i v i l and M i n e r a l s Corp. and the Long Beach I n t e r n a t i o n a l Coal P r t o j e c t on November 4, 1981. 8. Package.  Bechtel  Civil  and M i n e r a l s  Corp. Standard I n s t r u c t i o n t o B i d d e r s  9. Karen Kraus B i v e n s and E n i d B a i r d L o v e l l , Joint Foreign Partners, S e r v i c e E x t e n s i o n D i v i s i o n , ( M o n t r e a l , Que.: Board i n Canada, 1966), p . 34.  Ventures with The Conference  10. I n f o r m a t i o n from a Report on the User Charge C o n t r o v e r s y p r e s e n t e d t o the Long Beach I n t e r n a t i o n a l C o a l P r o j e c t by the D i r e c t o r o f the P o r t o f Long Beach, June, 1982. 11. Louis W. Stern, D i s t r i b u t i o n Channels B e h a v i o r a l ( B o s t o n , Mass.: Houghton M i f f l i n Company, 1969), p . 23.  Dimensions,  12.  I b i d . , p . 24.  13.  Karen Kraus B i v e n s and E n i d B a i r d L o v e l l , op. c i t . , p . 48.  14.  I b i d . , p . 48.  (165)  15.  I b i d . , p. 48.  16.  I b i d . , p . 48.  17. H. P. Drewry ( S h i p p i n g C o n s u l t a n t s ) L i m i t e d , Research D i v i s i o n , The Growth o f Steam C o a l Trade, "A Review and F o r e c a s t o f I n t e r n a t i o n a l Trade i n Thermal C o a l and S h i p p i n g Requirements: 1980-90", 1980, p. 130.  (166)  TABLES AND FIGURES  (167)  FIGURE 4.1 LBICP ORGANIZATIONAL STRUCTURE  CROWLEY MARITIME CORP.  UNION PACIFIC LAND CO.  C. ITOH AND CO.  METROPOLITAN STEVEDORE  PORT OF LONG BEACH  LONG BEACH INTERNATIONAL COAL PROJECT  EXECUTIVE COMMITTEE  JOINT COORDINATORS OF EXECUTIVE COMMITTEES  GOVERNMENT AFFAIRS SUBCOMMITTEE  ENVIRONMENTAL SUBCOMMITTEE  FINANCE SUBCOMMITTEE  ENVIRO-SPHERE EBASCO  INDUSTRIAL BANK OF JAPAN  MISC. CONTRACTORS  ENGINEERING SUBCOMMITTEE  BECHTEL ENGINEERING  MISC. CONTRACTORS  PORT OF LONG BEACH PLANNING GROUP  LEGAL SUBCOMMITTEE  CONVEYCO ENGINEERING  REESE-CHAMBERS CONSULTANTS  MARKETING SUBCOMMITTEE  PACIFIC BULK TERMINALS  MISC. CONTRACTORS  FIGURE 4.2 PBT ORGANIZATIONAL STRUCTURE  CROWLEY MARITIME CORPORATION  METROPOLITAN STEVEDORE COMPANY  C. ITOH AND COMPANY  PACIFIC BULK TERMINALS  LBICP MARKETING SUBCOMMITTEE  LBICP ENGINEERING SUBCOMMITTEE MANAGEMENT COMMITTEE  MARKETING (C. ITOH & CO.)  OPERATIONS (METROPOLITAN STEVEDORE)  SHIPPING (CROWLEY MARITIME)  FIGURE 4.3 LBICP TIME SCHEDULE  June Executive  Committee  D e c i s i o n o f Terminal  J u l y | Aug.  '82 Sept.| Oct. Nov.  Dec.  '83 J a n . | F e b . l Mar.  •83  •84  '85  A  Rates  Final  Decision....  - Reduction of r e l o c a t i o n cost of o i l wells - Study o f o p e r a t i o n c o s t - Negotiation of t r a n s f e r of Pier G operation P r e s e n t a t i o n f o r Customers  <—*i  Study & D e c i s i o n o f LBICT O r g a n i z a t i o n s t r u c t u r e and e q u i t y allotment thereby Approval f o r EIR/EA and Permits  public hearing  Final EIR/EIS  I n c o r p o r a t i o n o f TOE and o p e r a t o r *s c o n t r a c t w i t h POLB S t a r t o f C o n s t r u c t i o n Work Engineering  I Create p r i v a t e corp. to s o l i c i t bids fiechtel^assemble data f o r . b i d s  Source:  Construction Start Prepare bi£?.*^id p e r i o d " .Negotiate ar packages . .select contractor  Long Beach I n t e r n a t i o n a l Coal P r o j e c t - Working paper No. 1, p . 17.  CHAPTER 5  MANAGING"A"JOINT" VENTURE;  A.  THE LEGAL"AND INSTITUTIONAL"ENVIRONMENT  INTRODUCTION  Legal  and  institutional  factors  have  an  development o f t h e U n i t e d  States  chapters  the developing  have  potential  focused  on  competitive  organization remaining  port  of a joint  link  demonstrate  that  of  the  with  West Coast  locations  venture coal  important  Pacific on  t o manage logistics  t h e development  coal  the  influence  export trade. Rim West  Coal  as  difficult  to  overcome  Coast,  and  the development o f t h i s system.  This  o f t h e Long  as  Earlier  Market, t h e  Beach  chapter Port  p r o j e c t , e x t e r n a l r e g u l a t o r y and i n s t i t u t i o n a l f a c t o r s p r e s e n t barriers  on t h e  the  geographic,  the last will  Terminal  a number o f  geologic,  and  economic c o n s t r a i n t s .  The and  purpose o f t h i s c h a p t e r i s t o d i s c u s s their  implications  f o r the  Long  t h e e x t e r n a l development i s s u e s  Beach  port  development  P o t e n t i a l i n s t i t u t i o n a l b a r r i e r s i n the areas o f environmental finance, and of  foreign p a r t i c i p a n t s , l e g a l / r e s t r a i n t of trade,  technology/market r i s k s w i l l be p r e s e n t e d i n d e t a i l . these  potential  these i s s u e s w i l l  barriers  and t h e d e v e l o p e r s '  form t h e b a s i s o f d i s c u s s i o n .  (171)  program.  permitting,  socio-economics, The i m p l i c a t i o n s  approach  to resolving  B.  THE  As  UNITED STATES POLICY"AND"REGULATORY FRAMEWORK  can  be  expected  regulatory  environment  indicates, dynamic  "The  and  can use.  and  is  state,  a  Japanese  U.S.  and  institutional Westpo  The  f o r western  c o a l development i s  n a t i o n a l changes The  1  number  deeply  and  Report  in  economic  magnitude  their  Force  describes  possible effects these  on  of  i n v o l v e d governments  of c o a l production, t r a n s p o r t a t i o n , trade, Task  and  changing.  example o f how  c o a l e x p o r t t r a d e t o the P a c i f i c Rim,  1.  t r a d e , the  and  direction."  Inter-Agency  policies  framework regional,  good  become i n a l l a s p e c t s  export  constantly  political  changes p r o v i d e  The  emerging  institutional  reflects  circumstances these  i n any  some o f  the  the  U.S.  development  of  and and the  are:2  For"coal'production:  (i)  Leasing  federal  conservative,  lands  for  coal  possibly restricting  production  coal  supply  and  and,  if  boosting  c o a l p r i c e s f o r export;  (ii)  Developing  mine  s a f e t y r e g u l a t i o n s f o r underground mines  and  p o s s i b l y c u t t i n g labour p r o d u c t i v i t y ;  (iii)  Requiring  l a n d r e c l a m a t i o n and  thereby  adding  t o the c o s t s o f  coal production;  (iv)  Imposing  state  severance  c o s t o f the c o a l p r o d u c t .  (172)  taxes  which  increase  the  ultimate  2.  For c o a l use:  (i)  Limiting such  prices  that  on competing  coal's  full  fuels  price  like  o i l and n a t u r a l  advantage  does  not  gas  become  apparent;  (ii)  P r o h i b i t i n g t h e use o f o i l and gas i n u t i l i t y  and i n d u s t r i a l  b o i l e r s t h e r e b y e n c o u r a g i n g c o a l use;  (iii)  Setting  emission  limits  f o r a i r pollutants  such  c o s t s more t o use and one c o a l type i s p r e f e r r e d  (iv)  that  coal  over another;  D e l a y i n g n u c l e a r development such t h a t c o a l - f i r e d power p l a n t s are chosen more o f t e n ;  (v)  Denying adequate r e t u r n s thereby blocking  3.  on investments by e l e c t r i c  utilities  conversions t o c o a l .  For c o a l ' t r a n s p o r t a t i o n :  (i)  Regulating  rail  rates  and a l l o w i n g  cross-subsidization  (rail  r a t e s a r e kept h i g h e r than j u s t i f i e d by c o s t o f s e r v i c e ) ;  (ii)  Blocking and  t h e use o f c o a l s l u r r y p i p e l i n e s t o p r o t e c t  possibly  losing  an  opportunity  to  railroads  cut delivered  coal  prices.  The  federal  clarification.  government's  attitudes  toward  They a r e , however, b e t t e r  to coal transportation  coal  supply  elucidated  and  than those  use  need  relating  and more s p e c i f i c a l l y t o p o r t development programs.  (173)  The  Westpo  Report  indicates  commitment b e g i n n i n g  i n 1966  the  t o s e t new  f e d e r a l c o a l to p r i v a t e developers outside in  the  1981,  United  States.  competitive  regard this  to  the  sector  port  i n the  face  of  p o l i t i c a l pressures  The  largest institutional the  Pacific  Government has This  is  an  and  u l t i m a t e l y t o end  users  been f o l l o w e d  is  the  programs  i s inhibiting  i n d i c a t e d demand and  b a r r i e r confronting is  the  the  throughout of  declaration  economic  Government, exports, steps  as  must  final  decide  how  be  participation  in  of  the  taken these  specifically state  cumbersome  basis  the  should  reserved  and  through  and  and  other  the  Far  of  intent  on  States  to  East the  to  f o r the  (and  not and  best  economic  coal  the  the  arbitrater  both  part  an  o f the  exports  this  national  U.S.  The  obstacle  and for  U.S.  problems  to  are  of  a  The towards  Positive investor  outlined  o t h e r components o f the c o a l c h a i n ) .  (174)  on  boards.  trade.  development  but  to begin  Government, but  in  Government. missing,  agencies which are the  error  encourage  just  The  exports.  policy  growing  level  Federal  governments  planning of  exports  Government.  as  support  on  support  activities.  institutional  terminal f a c i l i t i e s  are  of  trade.  expanded U.S.  United  disinterest  maker  at  local  under  expansion  p o s s i b l e f i n a n c i a l i n c e n t i v e s t h a t would p e r m i t c o a l e x p o r t s commercially  within  s a l e s were s u c c e s s f u l l y conducted  a strong  countries  admission  policy  economic s t a n d a r d s f o r the s a l e o f  towards expanding the export  perceived  and  only  a  t o date not y e t e s t a b l i s h e d a f i r m p o l i c y on c o a l  widely  omission Not  Rim  made  l a c k o f u n d e r s t a n d i n g of f e d e r a l d i r e c t i o n i n  development  and  to  lease  The  3  government  T h i s o b j e c t i v e has  coal  the f i n a l i z e d p r o g r a m .  federal  are  also  not part  presenting West  a  Coast  The  Westpo  that to  "no  Report d i f f e r s  with  p o l i c y questions  achieving  within  level  the  exports.  existing  e n v i r o n m e n t a l , s a f e t y , and other  under which new  Projected  framework  not  to  letter,  these  can  cause  significant  methods,  transportation  facilities  and marine d e l i v e r y systems pose s i g n i f i c a n t  o f t h e U.S. are:  The u n r e s o l v e d  advises  there  be  state  attention  p o l i c i e s and r e g u l a t i o n s .  conversion  on the F a r East  can  and  Rigorous  5  c o a l export t r a d e .  exports  Westpo then q u a l i f y t h i s  4  project's completion.  Western U.S.  concludes  impediments  federal  c o a l p r o j e c t s must comply.  t o the d e t a i l o f the v a r i o u s the  as  coal  of  and  i s a l a r g e and expanding i n s t i t u t i o n a l  must be g i v e n followed  above  characterized  regulations."  statement by i n d i c a t i n g t h a t t h e r e framework  as s t a t e d  can be a c c u r a t e l y  the d e s i r e d  accommodated  t h e views  delays  If  t o the  i s s u e s s u r r o u n d i n g m i n i n g and c o a l  and  utility  The U.S.  corridor  systems,  obstacles  port  t o the  Inter-Agency Task F o r c e r e p o r t  a r e a number o f impediments t o the a b i l i t y  Western c o a l t o p a r t i c i p a t e i n the P a c i f i c  Rim market.  These  6  (i)  The  lack  U.S.  desire  Federal  (ii)  o f a f i r m , p r o - e x p o r t p o l i c y which a r t i c u l a t e s t h e and  willingness  Government's  to  supportive  ship  coal  abroad  function i n this  and  the  trade.  The need f o r improved and expanded e x p o r t i n f r a s t r u c t u r e which is  capable  of e f f i c i e n t l y  and  economically  transporting  U.S.  c o a l t o the c o u n t r y o f d e s t i n a t i o n .  (iii)  The  burden  development,  of  government  rail  costs of supplying  system  regulations  expansion,  and  which  generally  c o a l t o the e x p o r t market.  (175)  inhibit  mine  r a i s e the  (iv)  The  existing, inflexible  which has n e g a t i v e capital  C.  system  short-term  of  federal  mineral  leases  e f f e c t s on mine development and  investment.  EXTERNAL"DEVELOPMENT ISSUES  External of  development  the j o i n t  aspects  venture  partners.  o f t h e s e problems.  resulting will  i s s u e s a r e those t h a t o r i g i n a t e o u t s i d e  from  these  and o p e r a t i o n a l  The i m p l i c a t i o n s t o the p r o j e c t  external  tax the a b i l i t i e s  There a r e i n s t i t u t i o n a l  the c o n t r o l  of  issues  are s i g n i f i c a n t .  the developers  and  development  Their  their  resolution  consultant  sub-  contractors .  1.  Environment  A  large  multi-faceted  for  the Long Beach Coal  the  human  environment  environmental Terminal  A  brief  framework  will  f o r t h e Long  as t h e p e r m i t t i n g  economics.  To t h e e x t e n t t h e  t h e economic c o s t s o f m i t i g a t i n g  impacts, i t w i l l  outline  such  P r o j e c t i n v o l v e s t r a d e - o f f s between  and p r a c t i c a l  p r o j e c t i s a b l e t o support environmental  project  be  likely  made  Beach  of  Coal  negative  succeed i n p e r m i t t i n g the  Port  environmental  Development.  efforts.  permitting  This  will  be  f o l l o w e d by a s e c t i o n on major environmental i s s u e s .  The  environmental  task.  The  permitting  following  for a project of this  agencies  are a  (176)  size  preliminarily l i s t  i s a major o f those  h a v i n g some j u r i s d i c t i o n o r i n t e r e s t  (i)  i n the p r o j e c t .  L o c a l Agencies  C i t y o f Los Angeles C i t y o f Long  Beach  P o r t o f Los Angeles County o f Los Angeles County o f R i v e r s i d e County o f San Bernadino County o f Orange  (ii)  S t a t e Agencies  California  A i r Resources Board  Department  of Fish  State O f f i c e  and Game  of Historic  Preservation  C a l i f o r n i a Water Q u a l i t y C o n t r o l Board  (iii)  California  Coastal  Commission  Department  of Boating  and Waterways  F e d e r a l Agencies  Fish  and W i l d l i f e  Service  U.S.  Coast Guard  U.S.  Geologic  U.S.  Army Corps o f E n g i n e e r s  Survey  EPA Region 9 Bureau o f Land Management  (177)  a)  F e d e r a l Framework  The in  Clean A i r A c t the  Clean  changes t o control.  the  (CAA)  Air  Act  of  1970,  a l o n g w i t h major amendments  Amendment  federal  of  1977,  have  brought  adopted  significant  r e g u l a t o r y mechanism g o v e r n i n g p o l l u t i o n  Although the c o m p l e x i t y o f the C l e a n A i r A c t p r e c l u d e s  discussion  here,  certain  essential  f e a t u r e s o f the  work need t o be r e c o g n i z e d t o understand  how  statutory  the law may  and full  frame-  affect  coal  t e r m i n a l developments.  The two  CAA  r e q u i r e s the Environmental  types  Ambient  of  standards  Air Quality  necessary  to  for  Standards  protect public  P r o t e c t i o n Agency (EPA)  ambient  air  (NAAQS). health  designed to p r o t e c t p u b l i c w e l f a r e .  The  and  quality  called  "primary"  "secondary"  t o develop National  standards  are  standards  are  To d a t e , the EPA has  established  s t a n d a r d s f o r seven major c l a s s e s o f p o l l u t a n t s :  1.  Particulates  2.  Sulphur  3.  Carbon Monoxide  4.  Ozone  5.  Hydrocarbons  6.  Nitrogen Dioxide  7.  Lead  The  EPA  standards  has for  Dioxide  developed these  both  short-term  pollutants.  (178)  and  Short-term  long-term standards  exposure establish  l i m i t s on e m i s s i o n s  f o r p e r i o d s o f twenty-four  hours o r l e s s .  term s t a n d a r d s  a r e measured on an annual b a s i s .  To  the c o n t r o l  coordinate  of a i r pollution,  t h e EPA d i v i d e d t h e  c o u n t r y i n t o 247 A i r Q u a l i t y C o n t r o l Regions (AQCR's). can  include  according and  interstate  or  intrastate  areas.  to meteorological, i n d u s t r i a l ,  a r e t r e a t e d as a s i n g l e u n i t  pollution.  area  They  are  and socio-economic  s t a t e s have d e s i g n a t e d  the c o u n t r y t h a t do o r do n o t meet NAAQS.  regulate  These r e g i o n s formed factors  f o r t h e purpose o f c o n t r o l l i n g a i r  The EPA and i n d i v i d u a l  determines  Long-  areas o f  C l a s s i f i c a t i o n o f an area  what a c t i o n s t h e s t a t e and EPA w i l l be r e q u i r e d t o take t o air pollution  i s designated  compliance  from  a  existing  and new e m i s s i o n  non-attainment  w i t h t h e s e standards  area  sources.  An  (NA) i f i t i s n o t i n  for a particular  pollutant.  P r e v e n t i o n o f S i g n i f i c a n t D e t e r i o r a t i o n (PSD) p r o v i s i o n s a r e designed to protect a i r q u a l i t y  i n areas now meeting a l l ambient a i r q u a l i t y  standards;  the degradation  "clean  PSD l i m i t s  air"  emission  areas,  provides  a  of a i r quality  mechanism  to  c a r r i e d o u t through t h e s p e c i f i c r e q u i r e m e n t s , incorporated  i n State  Implementation  e f f e c t o f NA/PSD requirements area,  When  regulate  pollutant  from new s o u r c e s , and a l l o w s t a t e s t o determine t h e degree  o f new source growth d e s i r e d i n c l e a n a i r a r e a s .  an  i n so-called  NA r u l e s  NAAQS  must  Plans  i s as f o l l o w s :  be met f o r each  a r e met, PSD r u l e s  apply.  (179)  These f u n c t i o n s a r e  a l l o f which a r e t o be  (SIPS).  The r e g u l a t o r y  i f NAAQS a r e n o t met i n  new o r expanded  facility.  NA p r o v i s i o n s , i n g e n e r a l ,  r e q u i r e t h a t s t a t e s i n c l u d e i n t h e i r SIPS s p e c i a l p r o v i s i o n s designed to  upgrade  non-attainment  m a i n t a i n , above EPA air  areas.  approved  PSD  rules  l e v e l s , the  require  air quality  that  states  of t h e i r  clean  areas.  New  Source  Performance  governing  emissions  standards  comprise  applicable  new  implementation stricter  from  sources o f new  by  new  the l e a s t  pollutant  established  Standards  (NSPS)  are  federal  or modified s t a t i o n a r y  standards  sources.  These  s t r i n g e n t e m i s s i o n l i m i t a t i o n s t o which  are  subject;  individual  states,  source p r e - c o n s t r u c t i o n r e v i e w s , may  emission  restrictions.  NSPS f o r c a t e g o r i e s o f  Emission  sources  with  through establish  standards  are  respect to  any  type o f a i r p o l l u t a n t e m i t t e d .  S t a t e Framework  State  Implementation  individual and  states  Plans  (SIPS)  implement, m a i n t a i n ,  p r o v i s i o n s of  the  p l a n f o r EPA a p p r o v a l .  CAA.  Each  i f the  attainment  a r e a i n a s t a t e without  Under  the  and  state  source emits  mechanisms  enforce  which  submit  this  major e m i t t i n g s o u r c e s i s  a non-attainment a full  by  the r e g u l a t i o n s  i s required to  C o n s t r u c t i o n o f new  prohibited  SIPS.  are  pollutant  in a  or c o n d i t i o n a l l y  non-  approved  SIPS v a r y s u b s t a n t i a l l y w i t h i n and between s t a t e s .  the  December  Clean 31,  Air  1982;  Act  SIPS must  i f severe  e x i s t , the d e a d l i n e may  assure  oxident  be extended  (180)  and  attainment carbon  t o December 31,  of  NAAQS  monoxide 1987.  by  problems  As p a r t o f  an e f f o r t t o meet t h e s e d e a d l i n e s , as w e l l as t o m a i n t a i n a i r q u a l i t y i n areas needing NAAQS, many s t a t e s implement New Source programs.  Such programs r e g u l a t e new s o u r c e s o f a i r p o l l u t i o n .  programs  g e n e r a l l y r e q u i r e new s o u r c e s  control  Review (NSR)  technology  (BACT).  assessment t o demonstrate  They  t o implement b e s t  also  must  undergo  NSR  available  a i r quality  t h a t e m i s s i o n s from the new s o u r c e w i l l n o t  i n t e r f e r e w i t h t h e maintenance o r attainment o f any s t a t e o r N a t i o n a l Ambient A i r Q u a l i t y Standards. and  have  stricter  Most NSR programs cover more s o u r c e s  requirements  than  federal  S i g n i f i c a n t D e t e r i o r a t i o n (PSD) and non-attainment  c)  Major Environmental  A  brief  Preventions provisions.  Issues f o r t h e Long Beach Terminal  introduction  t o the s i t e - s p e c i f i c  of  Project  environmental  permitting  problems r e l a t e d  t o t h e Long Beach T e r m i n a l  P r o j e c t was g i v e n under  the  Ebasco  4.  Envirosphere  external  section  p e r m i t t i n g environment  outlined  i n this  Project's  section  management  o f Chapter  f o r the Long Beach P r o j e c t  followed  decided  The d e t a i l s  to  by  t h e manner  approach  the  o f the will  i n which  permitting  be the  task.  I m p l i c a t i o n s r e l a t e d t o t h i s p a r t o f t h e P r o j e c t w i l l be d i s c u s s e d .  The  California  Resources Clean  Health  Board  quality  from  Safety  (ARB) as t h e c o n t r o l  A i r Act.  emissions  and  Code  has  designated  the A i r  agency f o r the purpose  The d u t i e s o f t h e ARB a l s o  include regulation of  motor v e h i c l e s and e s t a b l i s h m e n t o f standards  f o r each  a i r basin.  Permit  of the  a u t h o r i t y t o operate  of a i r  stationary  sources r e s t s with the l o c a l a i r p o l l u t i o n c o n t r o l d i s t r i c t , with the  (181)  ARB  a c t i n g as a r e v i e w b o a r d i n case o f a p p e a l s .  must a l s o ambient  adopt  rules  a i r quality  The l o c a l  and r e g u l a t i o n s t o a c h i e v e standards.  The  South  (SCAQMD), e s t a b l i s h e d  state  Coast  districts  and f e d e r a l A i r Quality  Management  District  by t h e Lewis  A i r Quality  Management  A c t , i n c l u d e s t h e c o u n t i e s o f Los A n g e l e s ,  Orange, San  B e r n a d i n o , and R i v e r s i d e . an  a i r quality  permits  pollutant  plan  t h e NAAQS and t o i s s u e  w i t h r u l e s and r e g u l a t i o n s f o r s t a t i o n a r y a i r  within  the Port  emissions  must  comply  n o t y e t approved  of  Long  Beach  must  obtain permits  with  EPA standards  s i n c e t h i s area i s c l a s s i f i e d has  t o achieve  sources.  Activities  levels  management  i n accordance  pollution  The SCAQMD has t h e r e s p o n s i b i l i t y t o adopt  from  which  Emission  and t h e new o f f s e t  C a l i f o r n i a ' s implementation  o f f s e t p o l i c y , i n a non-attainment  have a i r  t h e SCAQMD.  as a non-attainment  i s a l s o r e q u i r e d f o r a l l new s o u r c e s .  will  area.  policy,  Because EPA  p l a n , an EPA p e r m i t  Under t h e c u r r e n t EPA e m i s s i o n  a r e a , a new source p e r m i t may o n l y  be g r a n t e d i f t h e f o l l o w i n g c o n d i t i o n s a r e met:  (i)  Emission  limitations  emission rate  (ii)  A l l other applicant  are defined  (LAER) f o r t h a t  existing  major  w i t h i n the state  as t h e lowest  achievable  source.  sources  owned  or operated  a r e i n compliance  with  by t h e  applicable  e m i s s i o n l i m i t a t i o n s and a i r q u a l i t y s t a n d a r d s .  (iii)  At  least  one-to-one  emission  (182)  reductions  or  offsets  from  existing for  sources i n t h e a r e a a r e a c h i e v e d i n o r d e r t o p r o v i d e  reasonable  further  progress  towards  attainment  of the  NAAQS.  (iv)  The e m i s s i o n o f f s e t s o b t a i n e d must p r o v i d e a p o s i t i v e n e t a i r q u a l i t y b e n e f i t i n the affected area.  The  lowest  stringent lowest  is  emission  rate  achieved former  achievable emission  achieved  f o r such  condition  intended  technology  limit  rate  i s d e f i n e d as e i t h e r  f o r any source  i n practice  sources.  or  found  may  (BACT)  which  stringent  than  expected  demonstrate  i s not appropriate t o i t s case.  t o be much more  i n any SIP o r t h e  reasonably  The source  best  t h e most  t o be  that the  Nonetheless, available  i s r e q u i r e d f o r new s o u r c e s  LAER  control  i n attainment  areas.  Although EPA r e q u i r e s a t l e a s t one t o one e m i s s i o n r e d u c t i o n s , SCAQMD r e q u i r e s more than of the trade-off  an e q u i v a l e n t o f f s e t .  source  from  Depending on t h e d i s t a n c e  t h e new s o u r c e , t h e e m i s s i o n r a t i o may  be as h i g h as 2.2/1 b u t no l e s s than  1.2/1.  Otherwise,  t h e SCAQMD  p o l i c y i s s i m i l a r t o EPA's.  The  final  condition  g e n e r a l l y based location  but  t o demonstrate  on m o d e l l i n g .  a net a i r quality  benefit i s  Improvement i s n o t r e q u i r e d a t e v e r y  the net benefit  demonstrated.  (183)  to  the r e g i o n  must  be  clearly  Air  By  Quality.  early  South  June  Coast  earlier  an a p p l i c a t i o n w i t h t h e (SCAQMD).  t h e SCAQMD i s p r e s e n t l y  As i n d i c a t e d  proposing  t o modify  13 t o i n c l u d e s h i p and t r a i n e m i s s i o n s w i t h i n t h e d i s t r i c t  larger  projects  application evaluated  had f i l e d  A i r Q u a l i t y Management D i s t r i c t  i n the paper,  Regulation for  1982, t h e p r o j e c t  such  i s accepted  using  as a as  coal  terminal.  complete  the p r e s e n t  the  Regulation  I f t h e Long  project  will  13 s t a n d a r d s .  s t a n d a r d s do n o t r e q u i r e i n c l u s i o n o f t r a n s i t  emission  Beach  likely The  be  present  f o r s h i p s and  trains.  The  agency may  methodologies emissions would ability  take  exception  i n the emission  above  require  the regulated offsets  to mitigate  or  t o the a p p l i c a t i o n s , assumptions and calculations. maximum.  other  these  This  The  result i n  i n v e s t i g a t i n g agency  demonstrations  matters  could  successfully.  of  the  Project's  Some examples o f  p o s s i b l e o f f s e t s a r e i n d i c a t e d below:  (i)  Use  of  shore-based  electrical  c a l l i n g a t the f a c i l i t y on-board g e n e r a t o r s  (ii)  power  f o r the b u l k  "carriers  ( e l i m i n a t i n g the need f o r o p e r a t i o n o f  during the l o a d i n g  process).  Use o f two-stroke i n s t e a d o f f o u r - s t r o k e d i e s e l engines by t h e r a i l r o a d s w i t h i n the confines o f the c o a l t e r m i n a l .  (iii)  On  worst  case  days,  shut  engines w i t h i n t h e t e r m i n a l  (184)  down  one o f t h e two  boundaries.  idling  train  California is  does n o t have an adopted v e h i c l e i n s p e c t i o n program which  approved  by t h e EPA.  As a r e s u l t , EPA  any p r o j e c t t h a t f a l l s under t h e i r expressed  that  the  however,  present  (the  The  used  authority.  could  be  or  that  by  the  this  moratorium; should  avoid  p r o j e c t would be b l o c k e d o n l y i f f e d e r a l  funds  i f the  terminal i t s e l f )  Some c o n c e r n has been  affected  research indicates  this constraint. were b e i n g  LBICP  c o u l d withhold approval of  project  a i r e m i s s i o n s f o r the  exceeded  100  tons  per  stationary  year.  source  Neither of  the  above i s r e p r e s e n t a t i v e f o r the Long Beach t e r m i n a l .  Hazardous Wastes.  A file  s e a r c h o f the r e c o r d s o f twelve governmental  undertaken determine Champlin These  by  the  i f any  geotechnical  permits  O i l f o r dumping  sumps  are  i n f o r m a t i o n was  located.  been  hazardous  subterranean  extensive physical a program w i l l  had  consultants.  to  a g e n c i e s has been They  granted  i n the  waste  i n the  the  proposed  attempted  last  20 y e a r s  o i l field  terminal  Removal o f the sumps cannot now  to to  sumps.  site.  No  begin  until  sampling and t e s t i n g programs a r e complete.  Such  c o s t a p p r o x i m a t e l y $200,000 and i s needed promptly  t h a t the sump r e s t o r a t i o n program can be undertaken e f f e c t i v e method ( t h i s program can take from 4-12  so  i n the most c o s t  months depending  on  the t e c h n i q u e s r e q u i r e d ) .  Dredging D i s p o s a l  A  bioassay  was  made  of  the  proposed  (185)  berth  and  channel  dredge  material.  The  contaminated. dredge been  proposed  dredge  This w i l l  spoils  permit  a t an ocean  found,  ocean  material  the developers  dumping  dumping  was  site.  would  found  not  t o dispose  to  be  o f the  I f c o n t a m i n a t i o n s i g n s had  have  been  prohibited.  The  i n c r e m e n t a l c o s t s o f l o a d i n g the s p o i l s m a t e r i a l onto t r u c k s o r o t h e r land  transport  and l o c a t i n g  a fill  s i t e would have been 4-5 m i l l i o n  d o l l a r s more e x p e n s i v e than the ocean dumping a l t e r n a t i v e .  Noise  The  issue  of  significant.  noise  impacts  Problems w i l l  at  likely  the  terminal  result  from  location  are not  increased unit  train  f r e q u e n c y through p o p u l a t e d areas i n Los Angeles and Long Beach. extent of opposition w i l l terminal  are held.  difficult  i f they  n o t be known u n t i l  Local  pressure  can s u c c e s s f u l l y  groups  The  public  h e a r i n g s on t h e  can make  the p e r m i t t i n g  demonstrate  adverse  effects  on  their quality of l i f e .  Water Q u a l i t y / S t o r m R u n - O f f s / B a l l a s t Water  It  has been  determined  handled by t h e proposed project. the  that  storm  water  r u n - o f f can be a d e q u a t e l y  storm water system  e n g i n e e r e d as p a r t o f t h e  A d d i t i o n a l l y , t h e Environmental Sub-Committee have met w i t h  Los Angeles  Regional  Water  Quality  C o n t r o l Board  (LARWQCB) t o  d i s c u s s t h e d i s c h a r g e o f b a l l a s t water from b u l k c a r r i e r s c a l l i n g a t t h e P o r t o f Long Beach. whereby  the Port  would  LARWQCB has t e n t a t i v e l y agreed t o a program monitor  ballast  (186)  d i s c h a r g e through  a permit  system.  This  certify  system would  that  either  the  ballast  ballast  water  become  the  water  from  t h a t have been f l u s h e d would  require  that  is  sea.  liability  are  actions.  level  Unit with  the  i n v e s t i g a t i n g the trains  the  crossings  according since  tanks,  V i o l a t i o n o f the  of  ship's and  to  road  criteria  been  passing  reduced that  California  Public  were  to  22  warrant  by  the  crossings further  Utilities  Managing the P e r m i t t i n g  to  management  with  successful team  by  accomplished them  is  tanks  regulations  or  agent  and  itself.  the by  and  by  detailed  The  may  major  300  the  consultants. there  inter-  cause  approximately  evaluated  and  Commission  rail/vehicle  crossings  are  initially  developed  of  level  There  a r e nominated f o r f e d e r a l or s t a t e  supported  water  cargo  Port's  master  grade Project  list  has  be  six  only  investigation.  (CPUC) w i l l  determine methods o f improvements t o grade l e v e l  key  or  the P o r t  impacts  grade  users.  that  crossings  The  ballast  agent  Highway  Consultants  problems  Clean  ballast  s e c o n d a r i l y a l i a b i l i t y o f the d e v e l o p e r s  Railway and  s h i p ' s master o r  clean.  segregated  at  the  be  The  contacted  c r o s s i n g s and  to  which  funding.  Process  environmental staff.  executive  The committee,  r e t a i n i n g an  responsibility  permitting  for  is  an  environmental felt  this  experienced  sub-committee, work  could  environmental  consultant  and  the  permitting  process  (187)  complete  best  charging (see  section  on  Envirosphere  consultant quality,  will  biology,  aesthetics, necessary which  to  that  geology,  the  o u t l i n e d f o r the  (i)  The  (ii)  Impacts  other  set  4).  quantify  quality,  environmental  The  Chapter  and  air  and  accurately group.  in  analyze  recreation,  would  consulting  need  Ebasco  The  the  following  develop  performance  initial  general  water  socio-economics,  resources.  sub-committee  f o r t h the  e f f e c t s on  noise,  cultural  environmental  It a  was  framework  criteria scope o f  for  the  work  was  consultant:  impacts a t the mine would not be  outside  generally  and  the  San  Pedro  would  not  require  i n c l u d e d i n the  Basin  would  be  site-specific  EIR/EIS.  characterized detail.  For  example, the a i r q u a l i t y impacts on the r a i l  c o r r i d o r would  described  per  in  need not lands,  be  terms  of  pollutant  d e t a i l e d reference  whether  residential,  generalized  level  approximate  percentages  Considerably in  areas  the  t o the  land  could  where  i t is  felt  the  There affected  vacant, e t c .  be  devoted  l e s s c o n s u l t i n g resources  mile.  n a t u r e o f the  agricultural,  corridor of  emissions  On  characterized to  a by  d i f f e r e n t uses.  w i l l o b v i o u s l y be  permitting  be  task  will  spent not  be  constrained.  (iii)  The  Geotechnical  work.  Depending  EIR/EIS,  such  liquifaction  consultant on  items  the as  will level  provide of  subsidence  potential,  required. (188)  and  a l l necessary  detail  desired  investigations,  percolation  tests  in  field the  analysis could  be  (iv)  A computer s i m u l a t i o n model t o be developed by t h e e n g i n e e r i n g sub-committee  would  demonstrate  ship,  rail,  and  terminal  a c t i v i t y and p r o v i d e t h e f o l l o w i n g subsets o f i n f o r m a t i o n .  -  Ship  location  points,  —  traffic  shipping patterns  lane  from  pick-up  and  the break-off  break-off  point  into  the h a r b o u r , and v e s s e l movement p a t t e r n s i n the P o r t .  Duration  of c o l l i e r  arrival,  berthing,  modes  of operation  —  hotelling,  loading,  of c o l l i e r  arrivals,  duration of  deberthing,  and  departing.  Number  and s p a c i n g  b e r t h i n g s , and  deberthings.  Collier characteristics — or  motor,  whether  s i z e , number o f h a t c h e s ,  in ballast,  type  of fuel  steam  used,  flag  flown, e t c .  Numbers  of  tugs  and  support  vessels  and  duration  of  service.  Scenarios  o f modes o f v e s s e l  operation  which take  account sea c o n d i t i o n s , simultaneous a r r i v a l loading  difficulties  which  might  cause  into  of v e s s e l s ,  stacking  up o f  vessels waiting to load e t c .  Information estimates and  safety  from the model w i l l be used i n a i r e m i s s i o n p r o j e c t i o n s ,  o f waste water d i s p o s a l needs, and assessment o f n a v i g a t i o n impacts. (189)  Major problems w i l l be brought  t o the a t t e n t i o n o f the environmental  sub-committee and t r a d e - o f f s n e c e s s a r y can be implemented d u r i n g t h e p l a n n i n g and d e s i g n phase.  The  e x e c u t i v e committee, upon t h e recommendation o f t h e e n v i r o n m e n t a l  sub-committee, companies  chose  first  because  b u s i n e s s , b u t second in-house.  Envirosphere of their  because t h e i r  Ebasco  other  consulting  experience  and knowledge  experience  and knowledge was a l l  Many o f t h e environmental specialized  over  companies  which  process.  The p r o j e c t d e v e l o p e r s f e l t  i n the  p r o p o s a l s r e p r e s e n t e d teams o f  i n different  areas  i n the p e r m i t t i n g  t h a t a s i n g l e company w i t h t h e  t o t a l c a p a b i l i t y o f c a r r y i n g o u t t h e p e r m i t t i n g p r o c e s s when combined with  the p o r t planning s t a f f  would b e s t handle  this  critical  aspect  o f t h e development phase.  The  delegation  outside  of r e s p o n s i b i l i t i e s  p r o f e s s i o n a l s appeared  preferential  t o the p r o j e c t  developers  to  t o be t h e  i n the p e r m i t t i n g process.  The cumbersome t a s k  of  d e a l i n g w i t h v a r i o u s i n s t i t u t i o n s and p u b l i c  agencies should only  be  undertaken  technical  course  f o r the p e r m i t t i n g p r o c e s s  by  ability  experienced  individuals.  and p o l i t i c a l  wherewithal  s u c c e s s f u l l y within time/cost c o n s t r a i n t s . the  environmental  unbiased, completely  They must  c o n s u l t i n g group  would  possess  t o conclude  the  the t a s k  The p r i m a r y o b j e c t i v e o f be  t o prepare  and f u l l y d e f e n s i b l e EIR/EIS documents.  complete,  These must comply  w i t h t h e i n t e n t o f c o n t r o l l i n g environmental  legislation.  Concerns o f o t h e r p u b l i c a g e n c i e s and a f f e c t e d c i t i z e n r y must a l s o be f u l l y recognized. (190)  In and  order  to  the  objectives within  the  established  budgetary  temporal c o n s t r a i n t s , the environmental c o n s u l t i n g program needed  t o be  s u p p o r t e d and  process  will  schedule  an  be  which  meetings. As  satisfy  The  c o n t r o l l e d by a competent management system.  monitored will  total  indication  presents  an  according  be  updated  permitting  of  the  example o f  to  detailed  semi-monthly  effort  scope  a  of  will  this  critical  for  take  path  sub-committee  from  8-15  requirement,  a detailed preliminary  The  months.  Figure  5.1  t a b l e of contents  for  an EIR/EIS development program.  The  project  responsive must be  planning  to  the  and  major  design  permitting  implemented which are  regulatory measures  framework cannot  be  and  railroads  or  ocean  structure  their  operations  terminal  location.  the  be  its  ability  to mitigate  due  been  to  organized  concern. the  o b j e c t i v e s of  financial seek  They  If or  be  The  from  requested  environmental p e r m i t t i n g  project w i l l  the  succeed o n l y on  the  operational  i n a manner which would reduce The  be  mitigating  assistance would  to  Technologies  developers.  to  sector.  the to  emissions  regulations the b a s i s o f  adverse e n v i r o n m e n t a l impacts  w i t h the t e r m i n a l c o n s t r u c t i o n and  B.  the  necessary  shipping  are quite i n f l e x i b l e .  areas o f  of  accomplished  it  has  c o n s i s t e n t with  wishes  constraints,  at  may  phase  associated  operation.  FINANCIAL ISSUES  This  section  implications  will to  the  discuss financial  the  overall  project  a l t e r n a t i v e s of (191)  a  financing  and  the  p a r t i c i p a t i n g Japanese  investor.  The c h o i c e  of a  f i n a n c i n g package a f f e c t s t h e a l l o c a t i o n o f  r i s k t o a l l p a r t i e s i n v o l v e d i n the p r o j e c t .  Risk w i l l be a n a l y z e d  number  of  A d d i t i o n a l l y the  parent  company  the p r e s e n t  1.  alternative  financial  guarantees versus  programs.  throughput c o n t r a c t s  will  for a  issue  of  be r e l a t e d t o  l e v e l o f demand.  P r o j e c t Finance  It  i s important  that a d i f f e r e n t i a t i o n  financing  and p r o j e c t f i n a n c i n g .  extension  of credit  cash  flow  repayment.  stream  assets  from  the  Project  the lender asset  looks  being  specifically  financed  i s an a t the  f o r the  debt  f i n a n c i n g which would  on t h e debt extended as a g e n e r a l  o f the sponsor.  conventional  financing basically  T h i s i s d i f f e r e n t from c o n v e n t i o n a l  involve recourse all  i n which  be made between  liability  against  The p r o j e c t type o f f i n a n c i n g u s u a l l y  means t h a t a separate  e n t i t y i s formed f o r the purpose o f f i n a n c i n g a  major  I t i s from  development.  only  this  e n t i t y and  the p r o j e c t  a s s e t s t h a t t h e l e n d i n g i n s t i t u t i o n s seek t h e i r repayment. company s e c u r i t y o r p l e d g e s a g a i n s t  any o t h e r  I f parent  a s s e t s o r revenues a r e  r e q u i r e d , i t cannot be r e g a r d e d as p r o j e c t f i n a n c i n g .  This i s a very  i m p o r t a n t d i s t i n c t i o n as i t i n d i c a t e s t h e s t r e n g t h o f t h e p r o j e c t i n t h e eyes o f t h e l e n d i n g i n s t i t u t i o n s and g i v e s t h e p r o j e c t an  important  independent  investment f o r m a t .  opinion  as  to  the c r e d i b i l i t y  developers of  their  Lending i n s t i t u t i o n s have complained t h a t p r o j e c t  f i n a n c i n g s h i f t s a g r e a t d e a l o f t h e new p r o j e c t r i s k t o the l e n d e r .  (192)  The a  r i s k s encountered by terminal  project  of  the  d e v e l o p e r s and  this  type  can  lending  generally  institutions for be  catalogued  as  throughput  to  follows:  (i)  Market  risks:  generate the return  Will  are  be  adequate  good  to  the  owners on  long-term  a  market  risk  throughput  However, i f the institutions  based  developer  with  on  contracts  of  interest,  letters  cancellable  in  90  it  recourse seek  days,  basis.  based on  The  additional  lending  security  is  debt  equity?  arranged  institutions will contract  group were t o  anticipated  would be  invested  these  expressions  transaction  to repay the  their  c r e d i b l e customers, t y p i c a l l y l e n d i n g such  cargo  stream of e a r n i n g s r e q u i r e d  a profit  there  there  of  highly  a project  with  agreements.  based intent,  If  assume  approach the  cargo  and  lending  solely or  unlikely financing  on  contracts that or  the  limited  i n s t i t u t i o n s i n t h i s case would from  the  development  parent  companies.  (ii)  Participant risk: of  potential  shareholding the of  lending the  will  relate  Long Beach P r o j e c t  investors  to  (after  major Japanese c o a l  i n s t i t u t i o n s are  participants  p r o j e c t s and basis.  The  to  in  the  independent  C.  Itoh  users).  satisfied  success  a large  number  dilutes  their  It i s  with the  particular joint  c o m p l e t i n g repayment o f the  A d d i t i o n a l l y the  has  important  track  record  venture.  This  undertaking  major  f i n a n c i n g on a  timely  in  f i n a n c i a l s t r e n g t h , management s t y l e ,  (193)  and  business  according  acumen  to  of  their  the  parent  history  of  company  will  participation  be  in  examined successful  j o i n t venture p r o j e c t s .  (iii)  Completion be  a  risk:  clause  In in  c o m p l e t i o n o f the  project  the  financing, there  debt  agreement  p r o j e c t w i l l be  indicating  a t a date and  not t o exceed a s t i p u l a t e d aggregate v a l u e . developers  must  contributed  equity.  will  not  be  provide The  required  to  necessary  lending loan  Foreign  Exchange r i s k :  terminal,  the  horizon.  financial  There  Hedging,  In  buying  are  Failing this,  funds.  a project  such as span  a  s i g n i f i c a n t currency and  the  funds  as  case,  Lenders  are  risk.  program w i l l  forward,  the  f o r an amount  additional  additional  will  that  i n s t i t u t i o n , i n such a  r a r e l y w i l l i n g to a c c e p t c o m p l e t i o n  (iv)  typically  other  the  Long Beach  20-25 y e a r risks  methods  of  time  involved.  reducing  r i s k o f s h o r t - t e r m c u r r e n c y f l u c t u a t i o n s are not a p p l i c a b l e a  long-term p r o j e c t o f t h i s n a t u r e .  The  the to  lending i n s t i t u t i o n s  w i l l u s u a l l y propose a c u r r e n c y or mix  o f c u r r e n c i e s which are  stable  against  and  repayment of  lower  preferably  currency. interest  (principally  The  lower  total  The  undervalued criteria  rates  the  principal  i s t o maximize the  available  in  foreign  benefit currency  yen).  interest  financing  rates,  cost.  (194)  however, must This  total  be cost  compared will  to  the  include  sensitivity Beach  f o r exchange  Project,  long-term  rate  i t has been  throughput  fluctuations.  recommended t h a t  contracts  be  For  the  Long  a number o f t h e  denominated  in  yen  to  s e r v i c e the yen p o r t i o n o f the debt t h e r e b y r e d u c i n g the r i s k s of the  the present dollar.  u n d e r v a l u e d yen i n c r e a s i n g  Any  upward v a l u a t i o n  i n value  vis-a-vis  o f the yen would  increase  the repayment c o s t s o f t h e sponsors i n d o l l a r s .  Political FOrce  Risks:  In most major f i n a n c i n g c o n t r a c t s t h e r e i s a  Majeure  clause  which  exempts  the  parties  from  performance under v e r y c l e a r l y p r e s c r i b e d terms o f r e f e r e n c e . These and at  usually  other the  include  items beyond  time  the  case,  the  concerns  would  be  shortages,  The  that  objective  be would  war,  acts  of  the r e a s o n a b l e c o n t r o l  major  the e x p o r t could  o f God,  contract  Terminal  countries  Acts  was  agreed.  lending  during of coal  possibly  the  institution  t o the  significantly  of the p a r t i e s  In  times o f U.S. Pacific  reduced o r  be  to  insure  s u p p l y o f energy s o u r c e s t o s e r v e U.S.  government,  Long  (and sponsor)  national Rim  and  halted the  energy  to  would  work w i t h  credit crisis.  could  other  by  law.  continuing  domestic needs.  t h i s Force Majeure s i t u a t i o n , t h e f u n c t i o n i n g o f a c o a l terminal  Beach  export  cease and the sponsors and bankers would t h e government be  extended  and/or through  A major r e s t r u c t u r i n g may  other the  sources  need  see i f  government-initiated  need t o be c o n s i d e r e d .  a F o r c e Majeure c i r c u m s t a n c e the r i s k o f f i n a n c i a l  (195)  to  In  loss  In  would  be  borne by t h e l e n d i n g  the  debt  obligation.  contributed during  2.  Financial  The  i n s t i t u t i o n s f o r an amount equal t o  equity,  The  developers  or possibly  risk  the return  losing  their  to this  equity  the e x p o r t i n t e r r u p t i o n .  Structure  s t r u c t u r e o f p r o j e c t f i n a n c i n g can be q u i t e complex.  s e v e r a l d i f f e r e n t types o f lenders documents  legally  companies.  binding  There  the  a r e many  s t r u c t u r e ; however, t h e r e  I t involves  and a l a r g e number o f debt s e r v i c e interrelated  possible  project  variations  developer  of  a  appear t o be a number o f f e a t u r e s  project common t o  most p r o j e c t s .  (i)  A  separate  assets using  entity  i s usually  and t o conduct e x t e r n a l this  normal  format, p r o j e c t  assets  project  segregated  The cash  from  financing  assets  o f t h e sponsors  debt.  created  flow  to hold  the p r o j e c t  f o r the p r o j e c t .  may be s e p a r a t e d  and used from  as s e c u r i t y  the p r o j e c t  the i n d i v i d u a l p a r t n e r s  may  i n order  By  from t h e f o r the also  be  to service  such d e b t .  (ii)  The  project  including is  entity  a corporation  sometimes s e l e c t e d  problems general  can  i n meeting a partnership  take  different  or partnership.  structural  The p a r t n e r s h i p  forms form  f o r t a x reasons a l t h o u g h i t can p r e s e n t the l e g a l has l e s s  (196)  requirements stringent  of lenders. capital  In  structure  requirements  than  a  corporation.  depreciation  schedules  and  Additionally  expensing  of  faster  certain  cost  c a t e g o r i e s a r e more f a v o r a b l e f o r p a r t n e r s h i p s .  (iii)  Depending on the ownership  s t r u c t u r e o f the p r o j e c t , the  a s s o c i a t e d w i t h the p r o j e c t may  debt  be " o f f - b a l a n c e - s h e e t " f o r the  sponsors.  (iv)  With p r o j e c t f i n a n c i n g , from the borrower's objective the  i s t o p r o v i d e l e n d e r s w i t h s e c u r i t y based  revenues  from  satisfied  with  processes  involved  project  the  this  output  contracts. security  p o i n t o f view, the  project  type are  i s very  Lenders  of  security  well-known  are  often  the  may  be  technology  and  market  i s committed  concerned  because  on  Lenders  i f the  and  s t r o n g and  i s insufficient  d i r e c t l y by  assets.  solely  the  that  debt  by  for  long-term  this  i s not  form  the p a r t i c i p a n t s ' o t h e r b u s i n e s s o p e r a t i o n s .  project  itself.  require additional entity  such  as  Alternatively, through  the  a  and  or  to  circumstances  the  lenders  support f o r the debt o f the level  sponsors  the of  such  higher  the  from  objectives  exposure  credit  guarantees  favourable  In  may  of  throughput  provide  s t a n d p o i n t o f the  project preserve  companies.  (197)  sponsors  The of may  project  agreements.  indirect  contingent o b l i g a t i o n s .  of  supported  l e n d e r s , t h e r e f o r e , a r e exposed t o a m a j o r i t y o f the r i s k s the  the  support  This i s less s i n c e one  of  financing  i s to  limit  the  credit  the  capacity of  the  parent  debt  (v)  Project  financing  traditional dedicated often  often  financing.  allows Because  higher  leverage  the p r o j e c t  than  revenues a r e  t o t h e payment o f p r o j e c t debt s e r v i c e , l e n d e r s a r e  willing  to  provide  requirements p r o v i d i n g  as  much  as  75-80%  of  capital  they a r e s a t i s f i e d w i t h t h e u n d e r l y i n g  s e c u r i t y arrangements.  3.  Financing"Alternatives  There  a r e many t y p e s  of financial  instruments  a v a i l a b l e t o a major  t e r m i n a l p r o j e c t ; s e v e r a l of these are discussed  a)  below:  D i r e c t Long Term P r o j e c t Loans  These c o u l d be i n t h e form o f bonds p l a c e d long  term  loans  loans  from  from major  major  financial  banking  on t h e open market,  institutions,  institutions,  tax  exempt  sponsored by t h e p a r t i c i p a n t s through t h e a u s p i c e s port  or municipal  financing venture  authority,  and paper  debt  e n t i t y proposed  have an e s t a b l i s h e d  and other  instruments.  sources As  long  term bonds  of a local o f market  t h e new  joint  f o r the Long Beach T e r m i n a l w i l l n o t  record  the use o f l o n g  term p u b l i c bonds  i s very u n l i k e l y .  The p a r t i c i p a n t s however do wish t o proceed  with  financing  a  long  term  basis.  (198)  package  based  on  a  fixed  rate  The  major banking i n s t i t u t i o n s i n the  resources  available  to  lend  United  the  States  have cash  participants.  The  d i s a d v a n t a g e i s the f l o a t i n g r a t e n a t u r e o f bank f i n a n c i n g the  relative  planning  short  horizon.  maturity  period  Bank i n s t r u m e n t s would  -the c o n s t r u c t i o n phase o f the  A  most  likely  form  of  the  be  the  project  more s u i t e d  some  of  provides  an e x c e l l e n t source o f funds as many i n s t i t u t i o n s seeking  of t h e i r p o r t f o l i o . interest  rates  Department,  will  (i)  the  benefit  tax  has  Beach.  This  some  and  form a p a r t  expect t o pay  exempt s t r u c t u r e . announced  this  Long  issued  The  lower  Treasury  features  of  a  soon pass t o congress which c o u l d type  of  financing.  The  proposal  include:^  Private  projects  revenue  bonds  according  financed  issued  t o the  with  after  1982  tax  free  industrial  be  depreciated  must  s t r a i g h t l i n e method r a t h e r  accelerated cost recovery expanded under the  (ii)  of  exempt investments t o  i t will of  Port  p a r t i c i p a n t s can  under the  l e g i s l a t i v e proposal reduce  tax  The  however,  the  revenue bonds  the  the  of  industrial  portion  through  are  of  for  would  authority  to  project.  financing  use  to  project  individuals  be  compared  and  1981  I n d u s t r i a l revenue bond  system d e p r e c i a t i o n  tax recovery  (199)  the  recently  act.  i s s u e s must be  S t a t e o r l o c a l l e g i s l a t i v e body.  than  approved by  a  (iii)  After  1985,  receive  (iv)  the  a  industrial  financial  Small  revenue  issue  thrust  using  industrial  one  of  terminal  of  both  depreciation be  commitment,  government.  main  from  contribution,  o b l i g a t i o n from the l o c a l  available for large  The  revenue bond p r o j e c t must  the  the  f o r the  the  will  not  be  corporations.  proposal  tax  bonds  or  i s to  exempt  financing  same p r o j e c t .  more a p p r o p r i a t e  prevent  corporations  and  accelerated  T h i s form would c e r t a i n l y  financing  alternatives for  a  development scheme.  Yen-Denominated Funding From Japanese F i n a n c i a l Markets  Financial  support  The  p r i n c i p a l forms would be:  three  Overseas (See  may  investment  Figures  5.2,  5.3,  proposal  and  (i)  Export C r e d i t  items  the  on  parts,  required  Japanese with  may  based  equipment,  and  from  the  ( i ) Export  ( i i i ) Yen  5.4  Japanese  for  market.  credit; ( i i )  syndicated  the  structure  loans. of  the  resulting responsibilities)  credit  project  possible  c r e d i t ; and  funding  Export  be  in  equipment Japanese  (200)  be  available  utilization accessories the  of and  terminal  exporter lending  in  must  the  Long  Beach  Japanese other  built  qualified  construction. negotiate  institutions.  The  the The  loan  credit  scheme the  i s illustrated  export c r e d i t  i n Figure  cannot  5.2.  exceed  The amount o f  either  the value o f  the e x p o r t c o n t r a c t o r 70% o f t h e j o i n t f i n a n c i n g w i t h other i n s t i t u t i o n s .  The terms f o r t h i s type o f c r e d i t  a r e 5-10 y e a r s and i n t e r e s t r a t e s a r e c u r r e n t l y i n t h e r e g i o n o f 8.5-9.5%.  (ii)  Overseas Investment  This  type  through  of  financing  the  purpose  partner  Bank of  would  corporation. investment Coast  is  project)  would  Japanese  Export-Import the  Credit  to  need  partner  o f Japan  (C.  would  obtaining  funds  use  invest  to  Depending Japan,  perceived  to  be  arranged  Itoh).  be  The  approached f o r  which  the  Japanese  in  the  foreign  on the p e r c e i v e d v a l u e o f t h e (a c o a l  as  high  terminal value  on  t h e West  energy  related  the terms range from 1-10 y e a r s and i n t e r e s t  r a t e s range from 6-9%.  The amount o f t h e l o a n can be  no g r e a t e r than 70% o f t h e r e q u i r e d t o t a l  funds.  The  l e n d i n g scheme i s p r e s e n t e d i n F i g u r e 5.3.  (iii)  Yen-Syndicated Loan  U n l i k e the E x p o r t C r e d i t o r Overseas Investment  Credit  the Yen-Syndicated l o a n would be made d i r e c t l y t o t h e terminal regulated  owners  (PBT).  by t h e Japanese  (201)  These  types  Ministry  of  loans are  o f Finance  (MOF)  and  a p p l i c a t i o n s must q u a l i f y a c c o r d i n g  following  1)  criteria:  The  loan  The  must  loan  be  must  development  3)  of  the  8  to  such as IBRD, EIB,  2)  t o one  for  projects  mineral  for  e x p o r t t o Japan.  The  loan  must be  institutions  EURATOM, EUROFINA.  be  of  international  and/or  used  geared  energy  to  finance  part  of  the  to  the  resources  import  of  Japanese goods.  4)  The  loan  must  arrangement  be  with  a  co-financing  international  financial  institutions.  For the Long Beach Terminal categories  The  2 or  10-20  8.6%)  years.  would plus  The  be  loans  Japanese  a premium.  amount o f  the p r o j e c t s i z e and Yen-syndicated  on  3.  interest rate  (currently  the l o a n c o u l d be based  the  long  The  term  prime  term would  be  l o a n would depend  on  c r e d i t s t a n d i n g o f the have seldom  borrowers.  been more than  $100  million.  Any In  yen the  credit case  represents  a  of  facility a coal  way (202)  to  will  involve  terminal  reduce  the  this  exchange  following  risk.  risk. scheme  Figure  5.4  indicates  that  throughput  the  terminal  charges  in  yen  owners would be either  b u y e r s , or the c o a l s e l l e r s . yen-based  throughput  supports  the  reducing  yen  the  cooperation  p r o d u c e r s and likely  American that  this  be  difficult  are  (labour, could  Japanese  an  amount  would  the  which  assist  in  T h i s system  terminal  owners,  u s e r s based on l o n g term c o n t r a c t s .  producers.  there  charge  in  This  of  the  o b j e c t i v e i s t o have  commitments  borrowing.  the  c u r r e n c y r i s k t o the d e v e l o p e r s .  requires  will  The  from  paid  to  An  several  secure  this  an  from  a d d i t i o n a l complication components  to  wharfage) which a r e  present  support  It  adverse  the  terminal  dollar  effect  is  expenses,  if  the  yen  devalued.  Yen to  borrowing appears t o be  an  attractive alternative  d o l l a r borrowing i n the c u r r e n t f i n a n c i a l  Table  5.5  interest yen/dollar  shows burden  is  for  exchange  substantially 11.2%  the  (to $ =  still  Eurodollar rate of  IBJ  analysis  the  project Even  172Y)  the r e a l  below  the  the  given  rates.  i f the  effective different yen  rises  interest cost  January  1982  of  6-month  14.88%.  Borrowing from the o t h e r P a c i f i c Rim been c o n s i d e r e d by the p r o j e c t  (203)  of  markets.  c o u n t r i e s has  developers.  not  c)  "Off-Balance-Sheet"  Financing  This  popular  has become  There  are  obligations sheet.  principally  two  word  ways  in financial  to  undertake  which do n o t r e s u l t as l i a b i l i t i e s  the  financial  financing  statements,  the equity  parent  circles. financial  on t h e b a l a n c e  i s not consolidated  but i s i n d i c a t e d  investment  can be  standard  used  its  r e l a t i v e unimportance i n p r o j e c t s  Two  types  terminal  of lease project  which  a r e more  are the leveraged  the  as a  The o t h e r  of t h i s  (which w i l l  on  In t h i s parent  footnote.  i s shown  There a r e s e v e r a l  i n a project  form o f l e a s i n g  only  i n the p r o j e c t  company f i n a n c i a l statements.  sheet method i s l e a s i n g . which  buzz  One i s t o own 50% o r l e s s o f a j o i n t v e n t u r e .  instance  Only  a  on t h e  off-balance-  types of l e a s i n g  type.  One  i s the  n o t be d i s c u s s e d  due t o  o f t h i s s i z e and t e r m ) . appropriate lease  and  f o r a major safe  harbour  lease.  (i)  The Safe Harbour Lease  The  Safe  Harbour  Tax  A c t o f 1981) a l l o w s t h e s a l e o f t h e t a x c r e d i t s .  Companies w i t h nominal becoming  Lease  a federal  lessors  on  equity  a  (under  the Economic  Recovery  income t a x l i a b i l i t y fairly  investors  risk  in  a  free  become  basis  leveraged  by  lease.  P o t e n t i a l nominal l e s s o r s i n c l u d e any company which i s subject project,  to federal  income  participant  (204)  tax.  lessors  In t h e Long could  be  Beach Upland  Industries  or  Crowley  Maritime.  the tax c r e d i t s c o u l d not be of  the  tax  International in  the  as  Business  transaction.  possible 5.6.  such  Machines  the  from  U s i n g the  the  the  benefit  of  depreciation which  safe  the  deduction  exceeds  the  an  outright  lessor i n turn  above-mentioned  tax  total 30%  a  Figure  approximately  the  or  lessors  shown i n  investment for  large  harbour l e a s e ,  would r e c e i v e  The  10%  become  i s as  l e s s o r of  t o t a l equipment c o s t .  that  Electric  could  f u n d i n g scheme f o r PBT  payment  extent  companies w i t h a General  In such a scheme, PBT  cash  the  f u l l y u t i l i z e d by members  p r o j e c t , major e x t e r n a l liability  To  30%  of  receives  credit  and  capital passed  cost  to  the  ERTA,  the  lessee.  During safe  the  period  harbour  constant  leasing  examination  appears t h a t be  repealed  at  the  is  since  time  the and  passage o f  provisions and  major The  criticism.  harbour  project use  of  been It  under  presently  leasing provision not be  financial conventional  l e a s i n g appears most p r o b a b l e f o r the  (ii)  the  have  t h a t t h i s method w i l l  the  completed.  safe  the  in  will place  underwriting leveraged  project.  Leveraged Lease  In a l e v e r a g e d  l e a s e , a l e s s o r t h a t has  taxable  income  from o t h e r s o u r c e s i s i n a p o s i t i o n t o p r o f i t from  (205)  the  l e a s e because, f o r t a x purposes, d e p r e c i a t i o n expense on  the t o t a l v a l u e  lessor  may  only  o f t h e p r o p e r t y may be t a k e n . put  up  20%  of  the cost  o f the  d e p r e c i a b l e property t o gain a tax c r e d i t equal t o t a l project value. is  derived.  A  T h i s i s where t h e term  leveraged  lease  scheme  The  t o the  leveraged  i s shown i n  F i g u r e 5.7.  The  Long Beach p r o j e c t has 3 d i s t i n c t  which  make  the  possibility.  First,  generate t a x a b l e operation;  lease  the p r o j e c t  an  income d u r i n g the f i r s t  other  U.S.  taxable  attractive  i s n o t expected t o  second, t h e Japanese p a r t n e r  substantial to  leveraged  characteristics  3-5 y e a r s o f does n o t have  income a g a i n s t  which  use the d e p r e c i a t i o n and investment t a x c r e d i t  the  p r o j e c t s ; and t h i r d ,  corporate them  many  entity  there  i s pressure  from  towards a  f o r the PBT owners which would deny  of the partnership  t a x advantages  (which  w i l l be r e t a i n e d under a l e v e r a g e d l e a s e ) .  The  Internal  Revenue  Service  number o f q u a l i f y i n g standards of  their  requirements  which  Development a r e as f o l l o w s :  (i)  guidelines  determine  f o r a true lease. relate  t o the  a  Some  Terminal  9  The l e s s o r a t a l l times d u r i n g the l e a s e and a t the  time  t h e equipment  (206)  i s first  placed  in  service  must  investment  have  a  minimum  "at  risk"  i n the equipment of a t l e a s t  20% o f  the adjusted b a s i s o f the property.  (ii)  The r e m a i n i n g the  useful  life  o f the equipment a t  end o f the l e a s e term must be t h e  o f one year o r 20% o f i t s o r i g i n a l l y useful  (iii)  greater  estimated  life.  The l e s s e e must not have a c o n t r a c t u a l r i g h t t o purchase market  the property value  contractual  nor right  at  less  may  the  to  cause  than  i t s fair  lessor any  have party  a to  purchase the a s s e t .  (iv)  The  l e s s e e may  n o t have f u r n i s h e d  any p a r t o f  the purchase p r i c e o f the a s s e t nor have or  guaranteed  connection  any  indebtedness  loaned  created  in  w i t h the a c q u i s i t i o n o f t h e p r o p e r t y  by the l e s s o r .  The  project  leveraged storm  leasing  drains,  facilities' leasing  components  that  include  utilities,  r e l o c a t i o n may  eligible  terminal  and  dredging.  for  facilities, The o i l  not q u a l i f y f o r leveraged  the improvement.  (207)  be  the  s i n c e the l e s s o r w i l l  a b l e t o "own"  may  probably  n o t be  legally  The  e f f e c t i v e i n t e r e s t cost  t o t h e d e v e l o p e r s can be  lowered through u s i n g v a r i o u s group from  must  however  give  depreciation.  reduce  t h e amount o f t a x l i a b i l i t y  expenses  under  reviewed.  and t h e lower  on  profitability  effective  alternatives  the  will  variables  derived  ultimately  when t h e p r o j e c t  interest  must  be  The f i n a l mix o f debt and/or  depend  many  would  The  The t r a d e - o f f s between t h e f u t u r e  the l e a s i n g  will  up t h e t a x b e n e f i t  The d e p r e c i a t i o n  becomes p r o f i t a b l e . tax  lease a l t e r n a t i v e s .  project  costs  continually  leasing  profitability.  funds Such  be measured a f t e r c o n s i d e r a t i o n o f  such  t a r i f f s , operating  as  capital  cost,  throughput,  costs, e t c .  D e c i d i n g on t h e F i n a n c i n g Mix  In t h e absence o f long-term throughput c o n t r a c t s , borrowing by PBT  from  outside  financing. from  agreed an  The debt  t h e PBT  project  lenders  proceed  will  on t h i s  n o t be on t h e b a s i s  need  participants'  t o guarantee  amount  will  t o be s e c u r e d by  parent  basis,  companies.  PBT's p a r e n t  to their  guarantees Should t h e  companies  t h e debt repayment t o o u t s i d e  proportionate  of project  shareholding.  have  lenders i n Figure  5.8  i n d i c a t e s t h e s t r u c t u r e o f t h i s type o f f i n a n c i n g s i t u a t i o n .  The  Industrial  financial  Bank  advisor.  o f Japan  was  retained  as t h e  initial  Subsequently t h e y s e c u r e d t h e s e r v i c e s o f  (208)  the  Investment B a n k i n g / P r o j e c t Finance D i v i s i o n o f the Bank o f  America  in  develop  and  package.  Los  Angeles.  recommend  The  primary  Their  an  optimum  inputs  committee o r i g i n a t e d as  joint  for  r e s p o n s i b i l i t y was  U.S. IBJ  dollar/yen and  the  to  financing  financial  sub-  Minerals  Inc.  follows:  c a p i t a l expenditure - source:  Bechtel  Civil  and  P o r t o f Long Beach. operating  cost  throughput  - source:  Metropolitan  - source:  M a r k e t i n g Committee o f LBICP and  p o r t charge  - source:  land lease costs  The  - source:  anticipated  capital  Metropolitan  Co.  Upland  and  i n t e r e s t during  region  300  million  advisors cash  and  flow  financial  the  Itoh Itoh,  cost  U.S.  Co.,  P o r t o f Long Beach, C.  escalation of  C.  Stevedore  Stevedore  Industries.  of  the  project  construction 1985  will  dollars.  The  including be  in  the  financial  f i n a n c i a l sub-committee s t r u c t u r e d a d e t a i l e d  analysis.  Their  attractiveness  of  purpose the  was  project  to and  determine to  test  p r o j e c t ' s s e n s i t i v i t y t o changes i n the f o l l o w i n g i t e m s :  1.  capital  costs  2.  operating  3.  terminal  4.  throughput tonnage.  costs charges  (209)  the the  Although  the f i n a n c i a l  each  these  of  experienced  r e t u r n o f the p r o j e c t was  parameters,  by  varying  the  the  most  sensitive  significant  terminal  charge  to  changes were or  throughput  tonnage•  The  return  and  debt  flow during  investment,  service a b i l i t y  presentation. the  investment of  on  return  e q u i t y , payback  period,  were each a n a l y z e d through t h e  The  conceptual  on  primary  and  concerns  of  the  p l a n n i n g phase were the  and e q u i t y ; a v e r y b r i e f  cash  partners return  on  d e s c r i p t i o n w i l l be g i v e n  t h e s e below.  (i)  Return on  Investment.  The i n t e r n a l r a t e o f r e t u r n on investment discount  rate  expected  future  or  which  equates  the  present  cash flows t o the i n i t i a l  investment.  In  this  case,  b e f o r e f i n a n c i n g and income t a x . 4 each  ROI  value  of  cash o u t l a y  was  determined  (As noted i n Chapter  o f the p a r t i c i p a n t s p r e f e r d i f f e r e n t  i n d i c a t o r s based on somewhat d i f f e r i n g  (ii)  (IRR) i s the  financial  criteria.)  Return on E q u i t y .  The  return  equates with  the  the  on  equity  present  present  value  value  (210)  is  of  the of the  discount the  equity  annual  rate  which  investment  residual  cash  flow  after  taxes. the  debt  amortization,  interest,  and  income  A r e t u r n on investment c a l c u l a t i o n i s based  total  investment  while  r e t u r n on  equity  on  i s based  on o n l y the e q u i t y c o n t r i b u t i o n .  To  assist  the  feasibility prepared. its  study The  on  the  on  supplied  by  ultimate  must be  with U.S.  the  the  and  Various  The  which  above  different  graphs  c o s t s , and  the  2)  of and  ranges  of  the be  and  a  were  financing  issues  per  developed  circumstances satisfied  a in  given costs.  then  presented  costs,  operating  c a p i t a l c o s t s t h a t c o u l d be accommodated t o  i s s u e s i n v o l v e d i n the project  the  investment  operating  keep the p r o j e c t w i t h i n the s t a t e d  The  1)  on  advisor  could  charts  criteria  was  return  be  proposed  lower than $ 6 . 0 0  the  capital  to  demonstrate  The  committee  analyzed  was  other  Coast.  financial  conditions  levels  indicating  West  charge must be  dollars)  model  several  executive  above 15%.  computer which  the  terminal  (1982  proposed t e r m i n a l  r e s u l t s o f the study s h o u l d  competitiveness  locations  ton  "marketing" of the p r o j e c t f i n a n c i n g , a  are  is  participants  many  further and  and  (211)  f i n a n c i a l planning complex.  complicated  their  criteria.  possible  by  Resolving the  divergent  of  such these  number  of  interests  with  r e s p e c t t o the f i n a n c i n g package.  and  sensitivity  limited  from  financially  allowed  the  feasible  that  can be made  tend  to only  be  of  the  without  indicated  With such l a r g e sums o f  are small " f i n e tuning"  t o the f i n a n c i a l  marginally  return or capital  i n making changes  boundaries range.  money i n v o l v e d , t h e r e  The  flow  a n a l y s i s have i n d i c a t e d t h e r e i s o n l y  flexibility  departing  The cash  affect  changes  scheme b u t  the o v e r a l l  these  project  requirements.  t h e o r e t i c a l minimum c o s t o f f i n a n c i n g can u s u a l l y determined.  relates  t o the developers'  operating  costs  relation capital make.  ability  o f t h e problem to  c o n t r o l the  (an e s c a l a t i n g component)  to i n i t i a l  costs.  and o p e r a t i n g  costs  and  The t r a d e - o f f s are a t best  their  between  d i f f i c u l t to  F o r example the p r o j e c t c o s t can be reduced by  removing loop  The n o n - c a p i t a l aspect  t h e second  track,  storage. these  shiploader,  or developing  If a project  decreases  smaller  i s well  i n capital  conceived  costs  usually  o f ground initially, result i n  efficiency  d e c r e a s e s when compromises a r e made t o t h e and  equipment.  changes  significantly  ability  t o be  a  (212)  detract  Manpower  smaller  in  plant  costs.  amounts  a  increases  terminal  operating  installing  planning  Additionally, from  the  these  terminal's  c o s t - e f f e c t i v e i n t e r f a c e with  the  other  components  of  capital/operating  the  cost  coal  chain.  t r a d e - o f f s are made  a c r u c i a l a s p e c t o f the t e r m i n a l p l a n n i n g  C.  How  these  represents  program.  FOREIGN INVESTMENT PARTNER  Foreign past  d i r e c t investment  5-6  years,  Federal  i n the  amounting  to  S t a t e and  the  f o r e i g n investment base. States  primarily  investment  be  which the  investment has  large  port  development  (and  of  the  appear t o be  number o f r e a s o n s . to  managerial United  gain  dollars in  1979.  the The  10  States  possibility relatively  of low  above f a c t o r s and will  likely  the  result  foreign  steam  coal  logistics  candidates to  o u t l i n e d i n the to  United  markets  vertical  l a r g e and  in  this  stable  level  This section  where o f the  projects  system  the  of will  investor  enterprise in  tax  rates;  (213)  Western  technological 2)  future  i n t e g r a t i o n to  States  the  to  the  United  Westpo Report t h e s e a r e : ^  States  for  in  related  attract foreign investors for a  marketing techniques;  capital  United  operation  infrastructure)  likely  and  investment  c o n t r o l over the  other  As  direct  increase  been made.  access  skills,  The  market  discussing  some degree o f  desire  U.S.  t o i n c r e a s e over the next decade.  exercises  States  billion  more than doubled i n  L o c a l Governments are making s i g n i f i c a n t e f f o r t s t o  investment c o n t i n u i n g  A  53.2  States  Government has p r o c l a i m e d a n e u t r a l i t y t o t h i s f o r e i g n i n v e s t m e n t .  The  United  United  secure 5)  a  the  raw  to  needs;  material  future  the  developments,  proximity  financing  1)  large  3)  supplies;  depreciation  of  the 4) the  United  States  ceiling  on  dollar  in  dividend  foreign  and  exchange  interest  markets;  remittances  and  to  6)  the  foreign  30%  tax  investors  (depending on t r e a t i e s a p p l i c a b l e ) .  The  Federal  Government  foreign investors.  continues  maintain  i t s n e u t r a l i t y towards  I t i s r e a l i z e d t h a t the r a t e of c a p i t a l f o r m a t i o n  significant  contributor  They  likely  would  to  to  prefer  the not  rate to  of  economic  implement  growth  any  in  policies  the  or  the is a  country.  regulations  which would decrease the amount o f f o r e i g n investment t o a v o i d the  adverse  e f f e c t s t o t h i s r a t e o f growth.  The  State  policy  of  foreign  and  Local  the  Federal  d i r e c t and  Westpo Report, the  Governments d e p a r t Government.  indirect State  (i)  They  Local  overall level  tax  abatements,  low  solicit to  four types  are:  the of  1 2  structure of  state  and  temporary  tax  industry;  incentives, and  and  and  According  utilize  f o r e i g n investments, these  E f f o r t s t o make the  Specific  areas.  Governments may  l o c a l taxes a t t r a c t i v e to  (ii)  from the n e u t r a l i t y  a c t i v e l y encourage  investment i n t h e i r  and  f i s c a l p o l i c i e s to stimulate  significantly  rate  such  as  exemptions,  assessments  that  lower  operating  costs.  (iii)  Access  to  industrial  borrowing costs  development  enjoyed by  o f t h e i r tax exempt s t a t u s .  (214)  bonds  which  provide  lower  State or L o c a l Governments because  (iv)  A  policy  providing  new  firms  with  public  services  roadways or u t i l i t y hook-ups a t l i t t l e or no  Although i t i s evident  that  such  as  cost.  f o r e i g n investment i s welcomed i n the  United  S t a t e s , t h e r e are some concerns t h a t l i m i t s should  be p l a c e d on the amount  of  key  direct  interest  investment or  energy.  p o s s i b l e major f o r United  According are  "monitor" United  the  federal level  The  acts  of  a  Act,  which  give  direct  in  investments.  the  the  and  Secretary  United  authorized  in  of  areas  national that  have  s o c i a l phenomena  Westpo,  Government  portfolio  there  authority  investments  in  to the  Act of  t o do  the  1974  (P.L.  Commerce  overall States  of  study while  was  of  the  93-479).  directed  foreign  direct  Secretary  same f o r f o r e i g n  to  of  the  portfolio  1 3  I n t e r n a t i o n a l Investment Survey Act o f  Under t h i s A c t , the  President  1976  (P.L.  i s d i r e c t e d t o s e t up  94-472). a  regular  comprehensive d a t a c o l l e c t i o n program t o conduct p e r i o d i c  benchmark s u r v e y s on d i r e c t and  The  apply  the  Survey  comprehensive,  T r e a s u r y was  (iii)  also  areas  environment or o t h e r  Investment  investments  and  could  in  are:  this  conduct  The  the  foreign  Foreign  Under  (ii)  limits  are  I n s t i t u t i o n a l / R e g u l a t o r y Task Group o f the  States, these  (i)  These  that  citizens.  t o the of  projects  i m p l i c a t i o n s on  States  number  in  Domestic  and  Foreign  (215)  portfolio  Investment  investment.  Improved  1 4  Disclosure  Act  (P.L.  95-213).  Securities  This  Exchange  (both f o r e i g n and of  The  above  foreign  investment.  would be  in  certain  There a r e ,  a  areas  does not  seek t o  of  national  They  economy, c o a s t a l air  are  beneficial  of  limit  or  restrict  should  some p r o t e c t i o n  security,  related  be  interest,  and  t h i s broad  specifically  fresh-water shipping,  transport, power.^  As  in  owners  the  amount  to  acquisition  energy  u s e r , or  federal p o l i c y of areas  of  ownership  of  resource sectors  of  domestic r a d i o  of  federal  2,  most proposed  combination  communications,  mineral  bulk  loading  these.  C.  Itoh  lands,  terminals  partner  parts  o f t h i s ownership t o Japanese e l e c t r i c u t i l i t y and  structure been  majority  will  i s acceptable to  based  future  companies  d i l u t e i t s 45%  The  Project  same  to  of  Beach  These  plans  on  problems  a  non-  and  6  Chapter  a  of  policies.  have  p a r t i c i p a n t s e i t h e r a r e s o u r c e owner, a f o r e i g n t r a d i n g company, a coal  the  deemed n e c e s s a r y  or  defence i n d u s t r i e s , c e r t a i n n a t u r a l  hydroelectric  discussed  (SEC)  to  I t does p r o v i d e a system of m o n i t o r i n g these l e v e l s  however, some e x c e p t i o n s t o  i n national  domestic  disclosure  domestic) of more than 5% of s p e c i f i e d k i n d s  s t a r t i n g point  interference. firms  Commission  expanding  securities.15  legislation  and  requires  minority should  d i r e c t investment  become major the  United  foreign  changes  users  States  ownership  be  made t h a t  or e q u a l f o r e i g n ownership.  (216)  of  the  would  foreign the  through  Long  selling  cement companies.  the  Government. by  of  as  terminal. I t has  developers discriminate  This further  to  avoid against  The  p o t e n t i a l owners o f the  t e r m i n a l , through guidance by  the  P o r t , have  been s e n s i t i v e t o a l l f e d e r a l / s t a t e / l o c a l r e g u l a t i o n s t h a t may  p e r t a i n to  the f o r e i g n ownership i s s u e . the " p u b l i c " a s p e c t sensitivities export of  to  o f the t e r m i n a l f a c i l i t y and  the  economic  steam c o a l t r a d e  a l l important  West C o a s t . i s perceived  There c o u l d  of be  the  terminal  I t must be  in  market  s i t u a t i o n s and  other  r e s t r a i n t s of  Sherman A n t i - T r u s t Act Trade  body o f law.  i n a l l U.S.  Commission  s t a t u t e s , most  I t cannot be  severely against  nature of t h e i r are  Act  trade. of  export  of  1914.  discrimination, terminal  on  the  terminal  the  monopolistic  These laws attempt  principal Clayton  laws i n t h i s  Act o f  the  federal  addition  to  these  anti-trust  statutes  as  part  A c t s mentioned e a r l i e r , are  d i s c r i m i n a t i o n i n p r i c e or  the J u s t i c e Department.  (217)  the  Inter-State  of  Commerce  the  their  facility,  constrained  s e r v i c e s through  state c o n t r o l l e d " p u b l i c " authority to operate. f u r t h e r c o n t r o l l e d by  area  and  In  17  to  1914,  emphasized enough t h a t a p u b l i c p o r t  bound by any  trade.  The  1890,  s t a t e s have c r e a t e d  a d d i t i o n to b e i n g  operations  the  r e a l i z e d that matters  F e d e r a l laws which seek t o p r e v e n t  are  very  public  allowing  TRADE IMPLICATIONS  competition  Federal  a  political  a d d i t i o n a l problems i f the proposed  promote the  operating  given  as a monopoly i n r e l a t i o n to some mine l o c a t i o n s .  There are a number o f U.S.  and  of  to m a t e r i a l i z e .  aspects  LEGAL'AND RESTRAINT OF  in  function  the s u r r o u n d i n g  n a t i o n a l s t r a t e g i c importance, r e s t r a i n t o f t r a d e , and  are  D.  T h i s p o i n t becomes e x t r e m e l y i m p o r t a n t  The  the Port  Commission  Although  i t may be p o s s i b l e  producing, first  that  there  i n l a n d , and ocean f r e i g h t  large  situation.  West  Coast  coal  competition  that the  could  monopoly  be  in a  perceived  f o r a number o f y e a r s u n t i l t h e demand f o r  steam c o a l s w e l l s t o a p o i n t which would j u s t i f y a second major The  issue  terminal  here  i s one o f e n s u r i n g  throughput  increases  i n price  attention  these  governmental/legal  The  developers  charges may  be  price  that  subsequently  increases  may  operating  very  may have some r e l i e f  Sherman A n t i - T r u s t  the  purpose  pricing  The the  difficult  to  receive  from  as  and major  attain  due t o  the  various  from t h e r e s t r a i n t  o f engaging terminal  o f trade p o s i t i o n  T h i s A c t a l l o w s p r o t e c t i o n from  8  A c t i f t h e a s s o c i a t i o n has been formed s o l e l y f o r i n export  i s export  be p r o t e c t e d  trade.1  trade.  from a c c u s a t i o n s  9  Obviously  However, t h e r e  the function o f a i s no s i g n i f i c a n t assurances  o f r e s t r a i n t o f t r a d e o r monopoly  techniques.  p r o j e c t development w i t h regulatory/legal  difficult  a f o r e i g n partner  framework  of  any  or a corporation.  n o t be impeded by  Governments.  The  In t h e case o f a U.S. c o r p o r a t i o n  p a r t i c i p a n t , t h e U.S. Government  financial  U.S.  should  most  i s s u e i n t h i s r e s p e c t has been an i n t e r n a l matter o f c h o o s i n g  partnership foreign  costs  precisely  h i s t o r y o f use o f t h e Webb Pomerantz A c t t o g i v e t h e p a r t n e r s they w i l l  facility.  bodies.  the  export  initial  are i d e n t i f i e d  through t h e Webb Pomerantz A c t o f 1918.^  major  on t h e  markets, i t i s c o n c e i v a b l e  port  This could continue  i s adequate  r e p o r t i n g of the parent  requires  companies.  (218)  complete  This regulatory  with  a a  and d e t a i l e d requirement  would  apply  t o t h e U.S.  owners,  Japanese end u s e r p a r t i c i p a n t s . be an o b s t a c l e t o t h e f o r m a t i o n  E.  C.  Itoh  and Company  and a l l  potential  These d e t a i l e d r e p o r t i n g requirements may of the corporation.  SOCIO-ECONOMIC ASPECTS  There  a r e two a r e a s which need  t o be d i s c u s s e d  economic impacts o f a major t e r m i n a l first  They w i l l of  The  construction  engineering  can be  actual  completing various  and c o n s t r u c t i o n  little  and  design  will  work.  likely  activity  The second  of t h i s  i s the  anticipated  undertaken  I t i s reasonable  will  and  t o accrue  or  given  will  mean  c o n s t r u c t i o n work.  that  have  a relatively  other  secondary  Further, minor  local  residents  different  (219)  a It  any major  will  will  a construction  impact  through t h e  benefits/costs  the l a r g e m e t r o p o l i t a n  This i s very  by  t o assume t h a t , w i t h t h e  area.  t h e h i g h degree o f u n i o n i s m i n a l l t h e c o n s t r u c t i o n t r a d e s area  that  base i n t h e Los Angeles/Long Beach a r e a s , t h e r e  nature  wages  be  commences  need t o import any o f t h e work f o r c e .  construction  site  portions  o f t h e Los Angeles/Long Beach a r e a .  construction  anticipated.  large population  project  which as many as  c o n s t r u c t i o n p e r s o n n e l w i l l be i n v o l v e d .  firm located outside  not be u n t i l  impacts very  installation  during  The  operation.  detailed  will  activity  be employed by t h e s u b - c o n t r a c t o r s  the terminal  terminal  be  tradesmen and o t h e r  t o the s o c i o -  p r o j e c t i n the San Pedro B a s i n .  i s t h e 3-4 y e a r s o f c o n s t r u c t i o n  300-400 l o c a l  i n regard  that  are  Additionally, i n v o l v e d on t h e  retain  a l l of  the  from t h e c o n s t r u c t i o n o f a new  mine  project  where the  i n c r e a s e d by over  There  will  be  the  a  small mining  community  permanent  employment  f o r approximately  85  people  community w i l l  be  size  labour f o r c e .  the revenue  Where l a r g e socio-economic  effective  be  from  logistics  will  the p o r t .  This w i l l  improve  the  system.  port This  facility could  be  is  allowing  encouraging  the  citizens.  impacts can accrue are i n r e g a r d t o a new  because  the  An important c o n t r i b u t i o n t o  f i n a n c i a l a b i l i t y o f the C i t y o f Long Beach t o s e r v e i t s l o c a l  opening  at  The socio-economic impacts t o the l o c a l community  great given t h i s  project  could  100%.  terminal location. n o t be  population of  a  mine  more  expansion  cost  of  the  t r a d e which would have not o t h e r w i s e m a t e r i a l i z e d .  The  Westpo  Report  highest  i n the  western  coal,  indicates  priority because  regulatory definitions issues,  but  can  that  of  those  they  do  and  have  socio-economic seeking to not  solutions  lend  problems  expand  the  themselves  should  development  to  characterized physical  consequences  that  are  just  "rank  as  the  kind  of of  environmental tangible  and  troublesome".20  The  Westpo  statement  h i g h l i g h t s the f a c t  have been r e l e g a t e d t o a lower l e v e l compromised due constraints. economic  to their I t must  impacts  from  that  the socio-economic  o f importance.  aspects  They are more e a s i l y  l a c k o f d e f i n i t i o n compared t o the e n v i r o n m e n t a l  be the  realized  a t the p r e s e n t time  development  (220)  o f western  coal  the major will  likely  sociobe  at  the mine s i t e s . rapid type  growth  These a r e t h e communities which w i l l  and o t h e r  o f change.  consideration.  social  and economic  The Westpo Until  Report  does  production  1995.21 mine  will  be  exported  As t h e P o r t w i l l  development,  Westpo  of  t e r m i n a l developer  coal  contracts  may  will  this  important  i n 1985 and 5-8% w i l l  be e x p o r t e d i n  impacts  o f a major  be o v e r s t a t i n g t h e socio-economic  impacts  c o a l development.  l i k e l y c o n t i n u e w i t h t h e p r o j e c t on the b a s i s guarantee  t o the P a c i f i c exist,  accompany  not include a very  n o t have t h e socio-economic  some minimum throughput  steam  that  E s t i m a t e s a r e t h a t o n l y 8.6 p e r c e n t  caused by t h e e x p o r t s e c t o r o f t h e western  The  changes  the end o f t h e c e n t u r y t h e preponderance o f Western  steam c o a l w i l l be s o l d d o m e s t i c a l l y . of  e x p e r i e n c e t h e most  i t can be  levels  Rim u s e r s . assumed  f o r the e x p o r t  I f these  of  long-term  the developers  western  throughput  o f t h e mines, t h e  r a i l r o a d s , and o t h e r l i n k s i n t h e l o g i s t i c s c h a i n must have overcome o r a t l e a s t m i t i g a t e d t h e socio-economic  F.  (and a l l o t h e r )  impacts.  TECHNOLOGY AND ENERGY MARKET RISKS  Future  changes  i n the a v a i l a b i l i t y  o f other  energy  sources,  competition  from o t h e r p o r t s , and changes i n t e c h n o l o g i e s c o u l d p r e s e n t major e x t e r n a l i s s u e s i n the development o f t h e Long Beach T e r m i n a l P r o j e c t . to  the various  Chapter terminal  site  3, t h e r o l e planning  alternatives  locations  espousing  o f o i l and n u c l e a r  horizon.  to conventional  proposed energy  Technologies port  loading  (221)  In a d d i t i o n  development may  change  during the  and methodologies facilities  may  plans i n  regarding  materialize.  With a 20-year p r o j e c t h o r i z o n , i t i s e n t i r e l y p o s s i b l e t h a t p r e s e n t could be  be r e f i n e d and implemented o r t h a t t o t a l l y new energy systems c o u l d  conceived.  I f these  c o n c e p t s become an o p e r a t i o n a l  reality  s i g n i f i c a n t l y impact t h e success o f t h e Long Beach T e r m i n a l . t h e s e a l t e r n a t i v e s and t h e i r this  section:  1.  The Market F o r O i l  The  imports policy  appear  will  A number o f  be d i s c u s s e d i n  s e r i o u s l y impact the u t i l i z a t i o n o f c o a l . O i l  t o dominate  countries drastic  or  a  greater  t o enter affect  Economists  on  into the  a r e n o t sure  reached the s t a b i l i t y importance  of  substantially steps  a l l other  and i t i s u n l i k e l y t h i s  discoveries,  to  competitive coal  impacts on t h e P r o j e c t  i t could  s t a b i l i t y o f t h e petroleum market and/or a s u b s t a n t i a l number o f  new d i s c o v e r i e s c o u l d  2.  ideas  long-term  that  to  reduce  their  Rim  Pacific  Rim  OPEC and o t h e r  This  to  a  level  New o i l  could  demand  supply have  a  for coal.  v e r s u s o i l have y e t  Over t h e next few y e a r s ,  price  alternative.  Pacific  energy  stable  contracts,  economics o f c o a l  the  changed should  o f t h e more  supply  anticipated  i n t h e world  change i n t h e f u t u r e .  willingness  point.  coal  will  issues  the r e l a t i v e  economies  could  be  o i l p r o d u c i n g a r e a s take which  s i t u a t i o n could  made change  coal  a  less  i n favor  of  also.  The N u c l e a r O p t i o n  The  proliferation  of  nuclear  power  (222)  i s another  source  that  could  counter  the  move  countries. various  As  to  massive  indicted  coal  in earlier  economic, e n v i r o n m e n t a l ,  development  of  the  reduced through new expanded  nuclear  problems  are  indication  that  nuclear  in  chapters, at  and  social  present  in  f o r the  the  next  short ten  I t appears  term.  to  There  fifteen  c o u l d then be implemented as a major energy  C o a l ~ S l u r r y T r a n s p o r t and  t e c h n o l o g y o f c o a r s e and  and  tested  the  next  sufficiently years.  Wheelabrator-Frye  t o make t h i s Programs  and  Bechtel  reduced  underground/seabed  pipeline  currently  this  breakthroughs  The n u c l e a r o p t i o n  After  was  l o a d e d aboard  investigated  alternative within being  developed  research area.  The  an  o f f s h o r e and  and  offshore in  100-200  mooring feet  a v e s s e l , the decanted  of  coal  loading  facility.  an  buoy water).  water would  f o r reuse.  c a p i t a l c o s t s f o r t h i s type o f f a c i l i t y would be a p p r o x i m a t e l y conventional  concept  pumped through  r e t u r n v i a a second p i p e l i n e t o the T e r m i n a l f a c i l i t y  a  by  c o a l r e c e i v i n g and s t o r a g e l o c a t i o n .  to  miles  than  no  source.  t o a 4 i n c h minus s i z e  2-3  more  nuclear  i s , however,  years,  a probable  are  in  (approximately the c o a l  that  f i n e s c o a l s l u r r y has been  i n v o l v e s a c o n v e n t i o n a l on-shore C o a l would be  the  Ship-Loading  The  2-5  to  an  develop.  these  are  t e c h n o l o g i c a l o r s a f e t y developments such t h a t could  It i s possible  Rim  there  problems r e l a t e d  cannot be taken t o r e s o l v e some o f the problems.  3.  Pacific  be  us  option.  the  could  program  with  utilization  The  20-30%  However,  the  o p e r a t i n g c o s t s would be s i g n i f i c a n t l y reduced and the o p p o r t u n i t y o f u s i n g maximum s i z e  c o l l i e r s t o take f u l l  (223)  advantage o f t h e  economies  o f s c a l e f o r ocean shipment would be a v a i l a b l e t o many l o c a t i o n s ( f o r both s h i p p i n g locate  and r e c e i v i n g ) .  T h i s system o f f e r s t h e o p p o r t u n i t y t o  i n a non-residential port  coastal  locations  thereby  area  reducing  and take  advantage  the environmental  economic impacts c o n s i d e r a b l y below t h a t o f a s t a n d a r d  4.  Shallow"Draft  United  years.  States  countries.  are  presently  United  States  Marad  published  45-foot  and t h e P a c i f i c  Rim c o u n t r i e s  A d d i t i o n a l l y , many r e s e a r c h i n progress and v a r i o u s  by  f o r a number o f  departments  a preliminary  increase  o f 60,000 t o n s  vessel).  i n A u s t r a l i a and P a c i f i c and development programs  t h e Maritime  design  d r a f t v e s s e l t o be l o a d e d  construction  Administration  o f t h e Japanese i n 1982 which  lack  costs  of this  technology  could  service  particular  contract.  This  Government.  would  enable a  deadweight  over  a conventional  45 f o o t  There a r e f u r t h e r s t u d i e s n e c e s s a r y r e g a r d i n g t h e  2 2  of f l e x i b i l i t y  a  i n the  t o 144,000 t o n s deadweight ( t h i s i s  type  o f v e s s e l versus  Measures must a l s o be made o f a d d i t i o n a l o p e r a t i n g the  facility.  d r a f t c o l l i e r s has been a t o p i c o f i n t e r e s t i n  between t h e New South Wales p o r t s  Rim  draft  socio-  There a r e p r e s e n t l y s e v e r a l low d r a f t / h i g h deadweight v e s s e l s  operating  an  and  Colliers  Development o f s h a l l o w the  o f remote  be  i n trading patterns.  developed  and used  set of ports  over  standard  costs r e l a t i n g t o  I t appears t h a t  f o r dedicated a  long  this  vessels to  term  development has t h e p o t e n t i a l o f e n a b l i n g  (224)  vessels.  throughput p o r t s on  the  Columbia  effectively  River  and  compete  other  with  locations  on  Long Beach i n ocean  the  West  Coast  s h i p p i n g economies  to of  scale.  5.  Coal Derived  Sources  T e c h n o l o g i c a l developments are b e i n g made i n the use o f c o a l d e r i v e d energy  sources  methanol.  such  different  gases,  and  requirement  for  ship the  c o u l d be  a  the  more  export  of  major  reasonably  confident that  itself  These  diversifies  developers  refined  coal  reduced.  come as the w o r l d  types  enforceable  investment  E.  o i l mixtures,  conventional these  long-term  f o r i t s accounting  energy and  of  port  export  changes  loading  changes w i l l schedule.  contracts  sources.  an  i t s menu o f energy  p l a n n i n g h o r i z o n o f t h e i r investment secure  coal  and  U n i t e d S t a t e s c o n v e r s i o n f a c i l i t i e s c o u l d produce t h e c o a l  by-products  facility  as  not  are  The  terminal  certain  alternatives. facility occur  must  within  to The be the  The a l t e r n a t i v e i s t o  which  will  protect  the  life.  CONCLUSION  The  essence  and  minimize  external  of business risk  is a  issues outlined  i s risk. major  The  aspect  in this  ability of  chapter  any  The  project  development.  c o n t r i b u t e t o the  which must be c o n s i d e r e d by the d e v e l o p e r s . exclusive.  o f management t o q u a n t i f y  risk  The  profile  These r i s k s a r e not m u t u a l l y  t o t a l p e r c e i v e d r i s k r e s u l t i n g from  the d i f f e r e n t  aspects  o f the e x t e r n a l development i s s u e s w i l l form the bases f o r the development  (225)  decision. fluctuations  These  will  which  are  be  augmented  beyond  by  present  technology day  d e c i s i o n t o p r o c e e d w i l l n o t be an easy one.  (226)  changes  forecasting  and  currency  ability.  The  END NOTES  1. Western Governors P o l i c y O f f i c e , Western C o a l E x p o r t Task F o r c e , Report o f t h e I n s t i t u t i o n a l / R e g u l a t o r y Task Group, Western C o a l E x p o r t s t o t h e P a c i f i c Rim, 1982, p . 6. 2. U.S. Department o f Energy, (prepared by Z i n d e r - N e r i s I n c . ) , F i n a l D r a f t t o t h e I n t e r a g e n c y C o a l E x p o r t Task F o r c e , U.S. C o a l E x p o r t s - The FarE a s t , November 1980, S e c t i o n 2.1.18. 3.  Western Governors P o l i c y O f f i c e , op. c i t . , p . 13.  4.  I b i d . , p . 16.  5.  I b i d . , p . 18.  6.  U.S. Department o f Energy, op.  c i t . , S e c t i o n 1.2.15.  7. U.S. T r e a s u r y Department, Proposed R e s o l u t i o n F i n a n c i n g Programs, Washington Week, January 16, 1982, p . 11.  to  Tax  Exempt  8. P r e s e n t a t i o n t o Long Beach E x e c u t i v e Committee by I n d u s t r i a l Bank of Japan, A p r i l 14, 1982. 9.  Ibid.  10.  Western Governors P o l i c y O f f i c e , op. c i t . , p. 158.  11.  Ibid.  12.  I b i d . , P«  13.  I b i d . , P- 162.  14.  I b i d . , P* 162.  15.  Ibid.,  16.  I b i d . ,- P* 168.  17.  Ibid.,  18.  I b i d . ,- P« 190.  19.  I b i d . r P« 191.  20.  I b i d . r P» 32.  (  P* 158.  P«  P«  159.  162  183.  (227)  21.  I b i d . , p. 14.  22. U.S. Department o f T r a n s p o r t a t i o n , Shallow D r a f t C o l l i e r D e s i g n s , C h a r l e s B. C h e r r i x , o f Shop D e s i g n , Report PD-267, November, 1981.  (228)  Maritime Administration, Project Director, office  T A B L E S AND  FIGURES  (229)  FIGURE 5.1  TABLE OF CONTENTS FOR EIR/EIS STUDY  1.  Assemble a thorough environmental  2.  d e s c r i p t i o n o f t h e proposed  project  including  p r o t e c t i o n systems, p l a n n i n g and economic a n a l y s i s .  I d e n t i f y , r e v i e w and a s s e s s a l l r e l e v a n t environmental  data i n o r d e r  to: •  summarize the d a t a base,  f o c u s i n g on the r e g i o n a l areas  poten-  t i a l l y a f f e c t e d by t h e p r o j e c t ; •  i d e n t i f y and d i s c u s s s e n s i t i v e environmental f e a t u r e s ;  •  i d e n t i f y d a t a gaps; and  •  identify  and  p r o j e c t conduct  3.  discuss  environmental  features that  and t h e d e s i g n o f subsequent development p l a n s .  I d e n t i f y , d e s c r i b e , and p l a c e i n p e r s p e c t i v e a l l p o t e n t i a l e n v i r o n mental concerns assess  a s s o c i a t e d w i t h t h e Long Beach C o a l T e r m i n a l  project;  significance.  4.  Recommend m i t i g a t i n g measures.  5.  Evaluate f e a s i b l e a l t e r n a t i v e plans.  6.  Discuss other planning considerations i n c l u d i n g :  Source:  can a f f e c t  •  p o t e n t i a l growth-inducing  impact;  •  boundary o f t h e p o t e n t i a l l y a f f e c t e d  •  r e l a t i o n s h i p between s h o r t - t e r m uses and long-term  •  i r r e v e r s i b l e and i r r e t r i e v a b l e commitments o f r e s o u r c e s ;  •  energy  •  aesthetics.  area; productivity;  consumption; and  Chambers C o n s u l t a n t s and P l a n n e r s p r o p o s a l f o r Long Beach I n t e r n a t i o n a l Coal P r o j e c t EIR/EIS.  (230)  August, 1981, p . 64.  FIGURE 5.2 EXPORT CREDIT FORMAT  JAPANESE EXPORT MANUFACTURER/TRADER  PACIFIC BULK TERMINAL COMPANY  Sources:  An I n t e r i m Report on Funding Sources p r e p a r e d f o r t h e members o f the E x e c u t i v e Committee o f t h e Long Beach I n t e r n a t i o n a l Coal Project. I n d u s t r i a l Bank o f Japan, January 14, 1982, p . 7.  (231)  FIGURE 5.3  OVERSEAS INVESTMENT  CREDIT FORMAT  EXPORT-IMPORT BANK OF JAPAN  JAPAN COMMERCIAL BANKS  JAPAN COMMERCIAL LEAD BANK  JAPANESE INVESTOR (C. ITOH & CO.)  PACIFIC BULK TERMINAL COMPANY  Sources:  An I n t e r i m Report on Funding Sources p r e p a r e d f o r t h e members o f the E x e c u t i v e Committee o f t h e Long Beach I n t e r n a t i o n a l Coal Project. I n d u s t r i a l Bank o f Japan, January 14, 1982, p . 6.  (232)  FIGURE 5.4  YEN-SYNDICATED LOAN FORMAT  JAPANESE  COMMERCIAL BANKS  PACIFIC BULK TERMINAL COMPANY  Source:  Long Beach I n t e r n a t i o n a l C o a l P r o j e c t Economic F e a s i b i l i t y p r e p a r e d by I n d u s t r i a l Bank o f Japan, A p r i l 1982, p . 17.  (233)  Analysis  TABLE 5.5  EFFECTIVE  INTEREST COSTS WITH U.S. DOLLAR/YEN EXCHANGE RATE MOVEMENTS  Annual Rate o f Revaluation (or Devaluation) % p.a.  Devaluation o f Yen  Base  Exchange Rate a t 10 Years L a t e r Japanese Yen p e r U.S. d o l l a r  Upward Revaluation o f Yen  Rate  % p.a.  - 1.0  243.26  7.55  - 0.5  231.31  8.08  220  8.60  0.5  209.30  9.12  1.0  199.16  9.64  1.5  189.57  10.16  2.0  180.48  10.68  2.5  171.86  11. 19  3.0  163.70  11.71  -  Case  Real I n t e r e s t  Assumptions 1  I n t e r e s t Rate:  8.6% p . a .  2  Term:  10 y e a r s , i n c l u d i n g a 3-year grace p e r i o d  3  Repayment:  Semi-annual e q u a l a m o r t i z a t i o n s c h e d u l e  4  Base C u r r e n c y :  Japanese Yen. (Borrowing i n yen and r e p a y i n g i n U.S. d o l l a r s based on the r e v i s e d exchange r a t e i n e f f e c t a t t h e time o f repayment)  Source:  Chambers C o n s u l t a n t s and P l a n n e r s p r o p o s a l f o r Long Beach I n t e r n a t i o n a l C o a l P r o j e c t EIR/EIS.  (234)  August, 1981, p . 85.  FIGURE 5.6  SAFE HARBOR LEASE FORMAT  MANUFACTURERS  s a l e o f equipment  TRADING  FIRM debt 70%  supplier's  ri  credit  PBT (LESSEE) 1— 1  Sale o f equipment l e a s e back  I l_.  yen  THIRD PARTY (LESSOR)  I I  rent  JAPANESE COMMERCIAL BANKS  Source:  U.S. FINANCE SOURCES  down payment 30%  Proposed Funding P l a n s and S t r u c t u r e o f Funding f o r t h e Long Beach I n t e r n a t i o n a l Coal P r o j e c t . I n d u s t r i a l Bank o f Japan, June, 1982, p . 18.  (235)  FIGURE 5.7  LEVERAGED LEASE FORMAT  equity  funds  debt funds INDENTURE TRUSTEE  LENDER debt s e r v i c e  purchase price  notes (non-recourse to equity participants)  Assignments )f l e a s e and r e n t  MANUFACTURER  rents t i t l e of equipment  PBT (LESSEE)  lease  yen c r e d i t o r d o l l a r  JAPANESE COMMERCIAL BANKS  OWNER TRUSTEE (LESSOR)  credit  e.p.| | e.p.| I e.p  *e.p.= e q u i t y p a r t i c i p a n t  Source:  Proposed Funding P l a n s and S t r u c t u r e o f Funding f o r t h e Long Beach I n t e r n a t i o n a l Coal P r o j e c t . I n d u s t r i a l Bank o f Japan, June, 1982, p . 25.  (236)  FIGURE 5.8  PARENT COMPANY FINANCING GUARANTEE FORMAT  1 JAPANESE USERS  Indication of throughput  I  I J  PBT  loan  LENDER  i n c l u d i n g lenders  Source:  o f debt p o r t i o n i n t h e l e v e r a g e d  lease  transaction  Proposed Funding P l a n s and S t r u c t u r e o f Funding f o r t h e Long Beach I n t e r n a t i o n a l Coal P r o j e c t . I n d u s t r i a l Bank o f Japan, June, 1982, p . 22.  (237)  CHAPTER 6  PROJECT/IMPLEMENTATION AND  CONTRACTING  INTRODUCTION  The the  management o f the  implementation phase i s v e r y  conceptual/planning  dollar  construction  phase.  project  feasibility  study.  to  development  a l l the  The  The  is  reality  equally  of  as  different managing  complex  from t h a t  a  as  250  d e t a i l required  issues  However, the  s t r u c t u r e must adapt t o  i s obvious.  million  undertaking  s i g n i f i c a n t l y greater  in  of  a  relation  organizational  changes from a study environment t o an  operating  environment.  The  chapter w i l l  o u t l i n e the  implementation  phase  discussions  of  (a)  programme;  (c)  union  is  the  examined  in  relation  c o a l s a l e s and  major  financial  negotiations.  to  o b j e c t i v e s which must be proceed  as  contractor  issues;  (d)  Additionally, to  the  risks  accomplished i f the  planned.  This  requirements;  organizational the  the  (b)  the  start-up;  throughput  a c c e p t e d by  will  contract  various  include marketing and  (e)  will  be  p a r t i e s to  a  t r a n s p o r t a t i o n agreement.  PARTICIPANTS  The  roles  stage  to  of the  the  participants  implementation  change  phase.  The  (238)  dramatically port  and  from  Upland  the  conceptual  Industries  were  major  contributors  implementation will  likely  phase  be  The  continuing  and  financial  as  and  the  including  p r i m a r i l y by  parameters  possible. up  programme.  of  the  conceptual  the PBT  operation partners  their the  facility Port  to  $66  The  an  phase. of  (C.  the  The terminal  Itoh,  CMC  amount o f  private partners  to  are  and  have a major r o l e i n  requirement t o c o n t r o l the  A d d i t i o n a l l y the  a c c e p t t h i s c o s t as p a r t o f the  C.  of  Long Beach p o r t management w i l l  involvement  relocation  to  cost  development g i v e n  operational  successful  the  up  funded  Metropolitan) . the  to  ensure  that  it  and/or Upland may million  for  the  design is  as  have  a  o i l well  i n d i c a t i n g they w i l l  not  the  and  project.  IMPLEMENTATION  If  the  developers  construction  phase o f the  co-ordinated,  and  objectives  are  definition  allows  cancelling  the  there  be  will  decision  decide  point  acceptable  There are  proceed  achieved. the  Unlike  competently the  flexibility  p r o j e c t ) , the major  cost  will  pass.  with  implementation  p r o j e c t , i t i s important t h a t t h i s be managed,  administrated  changing p l a n s w i l l be be  to  ensure  conceptual/planning  for  terminal  increases.  to  making  major  must p r o c e e d The  the  owners'  phase which  changes  according  (including to  p r i v i l e g e o f h a v i n g an  plan  t o the owners i n any  or v e r y e x p e n s i v e .  This w i l l  case.  s i x b a s i c t a s k s t o implementation o f the Long Beach p r o j e c t :  (239)  or  interim  I f a go-ahead d e c i s i o n i s made, r e v e r s i n g  e i t h e r impossible  by  or not  1.  Resolving  2.  F i n a l i z i n g major e n g i n e e r i n g  3.  E s t a b l i s h i n g a m a r k e t i n g program.  4.  F i n a l i z i n g t h e f i n a n c i a l program.  5.  S e t t i n g up t h e i n i t i a l  6.  Commencing u n i o n n e g o t i a t i o n s .  1.  Corporation  The for  the i s s u e o f a corporation versus  and c o n s t r u c t i o n c o n t r a c t s .  a d m i n i s t r a t i v e and o p e r a t i o n s  organization.  vs Partnership  problem o f a c o r p o r a t i o n v e r s u s the p a r t i c i p a n t s lengthy  a partnership  to resolve.  require  a  reports  from t h e f o r e i g n p a r t n e r s .  reporting  not be p o s s i b l e t o c o n t i n u e status.  a partnership.  The U.S.  process  i s a d i f f i c u l t one  Anti-Trust  provisions  involving significant  data  I f t h e p r o j e c t proceeds i t w i l l  w i t h t h e PBT u n i n c o r p o r a t e d  j o i n t venture  The s t r u c t u r i n g o f t h e f i n a n c i n g package w i l l  be dependent  on t h e t y p e s o f o r g a n i z a t i o n and t h e t a x consequences o f each. are  finance  ownership  section). issue,  association,  Engineering  The  legal  Board members,  details  voting  such  rights,  of t h i s as  fundamental  articles  share h o l d i n g  of  the  etc.,  will  and f o r m a l l y r e s o l v e d .  Contract  developers  Architect  ( t h i s w i l l be d e s c r i b e d i n  A d d i t i o n a l l y , as p a r t  the  need t o be c o m p l e t e l y  2.  There  a number o f ways which t h i s problem can be overcome i n i t i a l l y t o  a l l o w t h e f i n a n c i n g programme t o c o n t i n u e , the  and  and  will  have  Engineering  to  decide  (A &  (240)  whether  to  E) o r E n g i n e e r i n g  proceed  with  an  Procurement  and  C o n s t r u c t i o n Management  (EPCM) e n g i n e e r i n g  these  need  agreements  will  included/excluded  in  escalations  continue  be  fixed  out  portion  the  price  presently  on  a  of  and  is  what  components  ordered  responsibility  what  (these would r e l a t e p r i m a r i l y t o l a r g e t e r m i n a l equipment n o t be  a  of  regarding  developers  could  as  worked  The d e t a i l s o f  the  which  would  the  to  contract.  fixed  price  basis  from  suppliers) .  The  engineering  procurement and management a c t i v i t y  d i v i d e d i n t o two programme  and  separate  (2)  the  f u n c t i o n a l areas;  terminal  will  need t o be  (1) t h e o i l w e l l removal  construction.  While  the  terminal  c o n s t r u c t i o n c o s t s c o n t a i n a h i g h degree o f r i s k on some o f the major operational  components,  these  have  been  contingencies i n the engineer's/estimator's same  contingency  relocation area  policy  programme.  has  been  reasonably  p r i c i n g mechanisms.  followed  under  However, a much g r e a t e r  risk  t o exceed expense and time frame s c h e d u l e s .  number o f unknowns w i t h  covered  the  by This  o i l well  exists  i n this  There a r e a l a r g e  r e s p e c t t o the c o n d i t i o n o f t h e underground  p i p i n g , t h e e x t e n t o f sump g e o l o g i c a l decay, e t c .  The e n g i n e e r i n g c o n t r a c t o r w i l l  f u n c t i o n under t h e s u p e r v i s i o n o f the  PBT p a r t n e r s h i p and the p o r t e n g i n e e r i n g management. will  need  construction  to  co-ordinate  schedule  these  without  from Champlin's d r i l l i n g  two  tasks  to  adversily affecting  operations.  (241)  The c o n t r a c t o r remain  on  the  the p r o d u c t i v i t y  The  engineering  contract  will  specify  the  construction  Major t a r g e t dates may  i n v o l v e p e n a l t i e s or bonuses ( i f any)  or  A major  e a r l y completion.  indicated  timing  of  the  aspect  capital  of t h i s  The  engineering  complete  the  contract  work  design  criteria.  structural  and  this  that  they  the  sources.  financial  and  temporal  guidelines.  form  operating  the  minimum  terminal  acceptable  performance.  levels  One  of  o f s u p p l i e r s and  sub-contractors.  meeting  the  specifications.  Another  difficult  supervising  the  engineering  discharging  his  responsibilities  task  is  contractor  m o n i t o r i n g the s u b - c o n t r a c t o r s  in  to  a  of  for the  the most  determined  the  the  and  engineering  I t must be  requirements  to It  r e l a t i o n s h i p t o a s t a t e d l e v e l of t e c h n o l o g y These  are  the  would form  d i f f i c u l t t a s k s d u r i n g the c o n s t r u c t i o n phase w i l l be the supervision  late  document i s much more than a commitment  within  involves a specific  for  document would be  e x p e n d i t u r e s as  b a s i s o f the draw-down from f i n a n c i n g  3.  schedule.  detailed  owner/developer  ensure  that  professional  he  manner  is and  effectively.  M a r k e t i n g Programme  A  minimum  acceptable  prerequisite P a c i f i c Rim  for  level  building  the  of  throughput  terminal  guarantees  facility.  In  the  are  present  c o a l market t h i s l e v e l i s l i k e l y t o be below the l e v e l  activity  which  would  terminal  investment.  achieve It  is  the  owner's  possible  (242)  that  desired the  return  developers  a  on  of the  would  proceed w i t h the p r o j e c t i f throughput c o n t r a c t s were a v a i l a b l e which only covered  a break  even cash p o s i t i o n  i n the f i r s t few y e a r s .  expand the t e r m i n a l b u s i n e s s t o the planned tonnages, marketing/ producers  i n f o r m a t i o n program w i l l and  potential  end  a professional  be d e s i g n e d t o make western  u s e r s aware o f the  To  facility  coal  completion  date and o p e r a t i n g c a p a b i l i t i e s .  Part  of  this  marketing  " r a t e s " f o r throughput volumes,  contract  program  take  durations,  into  involve  developing  a  based on the c o m p e t i t i v e environment,  s p e c i f i c a t i o n s o f the c o a l , and r a t e s must  will  account  storage  requirements,  set  tonnage  technical  a number o f o t h e r parameters.  the  rate  levels  used  of  i n the  These  financial  pro-formas  but a l s o must c o n s i d e r the r e a l i t i e s o f the market i n the  near  medium  and  term  and  the  "inducement  effect"  required  to  s t i m u l a t e expansion o f the t r a d e .  As  a vital  separate  part  o f the throughput  section),  the  contract,  operating  (discussed  capabilities  further i n a  will  need  to  be  reviewed t o the e x t e n t t h a t commitments are made as t o the t e r m i n a l *s "performance".  This  will  involve  d i s p a t c h f o r s h i p s and t r a i n s . will  give  terminal.  potential It also  users will  participation  in  demurrage  and  A d d i t i o n a l l y , t h i s type o f commitment  confidence  assist  the  in  rail  the and  capabilities ship  of  the  modes i n making  f i n a l p r i c e r e f i n e m e n t s which p r e v i o u s l y had been based on r e s u l t s o f the conceptual study. accept  financial  The  fact  liabilities  that  should  (243)  the d e v e l o p e r s a r e p r e p a r e d t o performance  fall  short  of  a  s t a t e d c r i t e r i a w i l enhance t h e a b i l i t y o f t h e p r o j e c t t o a t t r a c t new customers.  In t h e Long Beach example, t h e r e i s an added advantage t h a t l o n g term throughput involving serviced  contracts  can be s i g n e d  during  near term c o a l shipments. by  the e x i s t i n g  became o p e r a t i o n a l . i n the f i r s t  Pier  G  t h e implementation  stage  These e a r l y shipments would be  facility  until  t h e new  facility  There may be some p r i c e d i f f e r e n t i a l s  involved  s e v e r a l y e a r s t o r e f l e c t t h e much slower o p e r a t i n g r a t e s  of the present  f a c i l i t y , b u t i t does p r o v i d e  a continuity of service  t h a t o t h e r planned t e r m i n a l s a r e unable t o o f f e r .  4.  Financing  Issues  The  f i n a n c i n g schemes d i s c u s s e d d u r i n g t h e c o n c e p t u a l  to  be  finalized  with  the  developers  making  f i n a n c i n g mix, d u r a t i o n o f debt, c u r r e n c i e s , e t c .  stage w i l l  decisions  need  regarding  Although t h e t h r e e  p r i v a t e companies i n PBT w i l l meet t o make these d e c i s i o n s , t h e r e may be  i n p u t s from t h e p o r t and/or Upland should  with:  (a) o i l w e l l r e l o c a t i o n c o s t s ;  e i t h e r decide  to assist  (b) p l a c i n g I n d u s t r i a l  Revenue  Bonds; o r ( c ) e s t a b l i s h i n g l e a s e t r a n s a c t i o n s .  To  the extent  secured  that port  specifically  revenue bonds a r e used, they  against  g e n e r a l revenues o f t h e P o r t .  the p r o j e c t  assets  may be e i t h e r  or  against  the  In t h e l a t t e r case t h e p o r t would need  t o be i n v o l v e d t o ensure t h a t t h e covenants a r e n o t so r e s t r i c t i v e as  (244)  to  preclude  f o r other  furthur  borrowing p o s s i b i l i t i e s  the  financial  working  criteria,  commitments  capital  the present  levels,  lack  will  debt  involve  service  o f throughput  covenants  coverage,  agreements  p a r e n t company f i n a n c i a l guarantees f o r t h e m a j o r i t y based pure  on t h e i r p a r t i c i p a t i n g s h a r e h o l d i n g . project  financing  as d i s c u s s e d  This  earlier  One o f t h e prime o r i g i n a l o b j e c t i v e s avoid  loans  partner  performance ultimately  of a  Japanese  major  will  also  likely  need  the high  lenders.  yensyndicated  t o the contractual  contracts  guarantee).  With  (representing no  guarantees a v a i l a b l e i n i t i a l l y t o support t h e yen l o a n s , financing  require  o f t h e Finance Sub-Committee was  throughput  government  other  not represent  and i n d i c a t e s  c r e d i t s which would be t i e d  the  and  of the financing  guarantees through t h e use o f e i t h e r  o r yen e x p o r t  as t o  will  will  degree o f r i s k t h e p r o j e c t r e p r e s e n t s t o p o t e n t i a l  to  by t h e p o r t  projects.  Although minimum  or r e s t r i c t  t o be supported  throughput  t h i s type o f  by p a r e n t  company  guarantees.  Although  the f i n a l  financing  t i m e , some g e n e r a l i z a t i o n s the in  package  i s only  speculation  can be made about t h e l i k e l y  at this  approach o f  d e v e l o p e r s g i v e n t h e p r e s e n t s i t u a t i o n , (as o f 3 r d q u a r t e r both  not that  t h e f i n a n c i a l and c o a l  make l o n g some  term o b l i g a t i o n s  interim  markets.  Current  1982),  interest rates  do  a t t r a c t i v e and i t may be a n t i c i p a t e d  construction  (245)  financing  may  be c o n s i d e r e d .  The  placement  of  conditions credits  the  long  become more  available components  with  penalty  Industrial leveraged term  Revenue lease  basis.  from  for  medium term should  would  the  be  deferred  There are  decision  is  taken  to  s u p p l i e r s ) i n 7-8  prepayment.  Yen-syndicated  Bonds would  would  then  be  used  until  presently  Japanese  t o cover  This  debt  favourable.  (given  terminal no  term  in  market  yen  export  purchase year  major  maturities  loans  and  conjunction  Port  with  a p o r t i o n o f the  b a s i c f i n a n c i n g on  a  reduce  to  in  the  risk  interest rates s t a b i l i z e  the  developers  at a very high  a  long the  rate at a  time t h e y must r o l l - o v e r the i n t e r i m f i n a n c i n g .  Whatever the  f i n a n c i n g scheme, i t w i l l be based on  a "framework" f o r  construction/ownership  o f the t e r m i n a l which t a k e s maximum exceptance  from  imposed  the  These  regulations  regulations  can  r e s p o n s i b i l i t i e s t o one  be  on  the  public  avoided  by  port  sponsored  delegating  o f the p r i v a t e s e c t o r owners.  such a framework, a l t h o u g h not  work.  construction An  r e p r e s e n t i n g what w i l l be  example o f done by  the  group, o f f e r s an i n d i c a t i o n o f the v a r i e t i e s o f approaches t o s o l v i n g the p u b l i c v e r s u s  private issue.  Three major o v e r r i d i n g f a c t o r s are i n v o l v e d i n the e s t a b l i s h m e n t framework f o r c o n s t r u c t i n g the t e r m i n a l  facility.  the p o r t as a p u b l i c f a c i l i t y must proceed w i t h on  a  total  bid  basis  r e c e i v i n g the work). on  the  basis  of  (which  means  They are not  negotiated  sealed  allowed  contracts.  (246)  The  first  of a  i s that  a l l c o n t r a c t i n g work  bids  and  lowest  bidder  t o p r o c e e d w i t h p o r t work  The  second  item  i s that  C.  Itoh  and t h e o t h e r  ultimate  project.  and cement companies w i l l  interest  be t h e  These companies have  i n the tax c r e d i t s  which  will  flow  little  from  this  The t h i r d item i s t h e d i f f e r e n c e o f o p i n i o n between t h e PBT  partners  as t o t h e i r f o r m a t i o n  extent  framework improve  steel  owners o f 45% o f t h e t e r m i n a l .  independent  the  Japanese  t h a t these i t will  i s s u e s can be r e s o l v e d  enhance  the a b i l i t y  as a c o r p o r a t i o n o r a p a r t n e r s h i p .  the p r o j e c t ' s  o f the operators  To  through t h e management  total  cost  to control  of funding  and  the c o n s t r u c t i o n  phase.  One framework which would  allow  areas  one  would  construct be  be  to  allow  the terminal  either  Upland  some b e n e f i t s o f the l a r g e r  on a n e g o t i a t e d  Industries  provided  by t h e P o r t  private  b i d basis  interests to  ( t h i s would need t o  o r Crowley M a r i t i m e  funds which they would use t o c o n s t r u c t be  i n each o f t h e above  Corporation).  the terminal  facility  The could  o f Long Beach based on s h o r t term t a x f r e e  notes s o l d t o t h e i n s t i t u t i o n a l market a t 9 o r 10% i n t e r e s t .  Uplands c o u l d  l e a s e t h e l a n d t o Crowley M a r i t i m e o r t o another p a r t y  who would agree t o complete c o n s t r u c t i o n o f t h e t e r m i n a l f a c i l i t i e s . The  completed  Beach.  terminal  The  Port's  f i n a n c i n g with would  guaranteeing the  terminal  master  regard  sub-lease  f a c i l i t y would be l e a s e d  t o Yen l o a n s  i t s lease  financial would  lease  be  would  guarantee  and/or c r e d i t s .  t o t h e PBT p a r t n e r s  performance. entitled  (247)  t o t h e P o r t o f Long  to  take-out  The p o r t i n t u r n  with  The c o n s t r u c t o r receive  the  the p r i n c i p a l s and l e s s o r o f  a l l the  tax  credits  available  under  in finalizing  a partnership.  the proposed PBT  This  could  credits individually.  for  PBT  without  represents could  be  one  any  This  loss  t o take f u l l  would p e r m i t  of  tax  under  a  advantage o f  corporate  benefits.  of a number of ways t h a t  organized  difficulties  organizational structure.  T h i s approach would a l l o w the p a r t n e r s tax  r e s o l v e the  The  the  structure  above  example  c r e a t i v e f i n a n c i n g packages  a c o n s t r u c t i o n management framework.  The  o b j e c t i v e i s t o take maximum advantage o f a v a i l a b l e tax b e n e f i t s minimize It  the  should  difficulties  be  noted,  decrease  as  the  increase  by  the  guarantees  i n v o l v e d with  however, t h a t  financial  and  risk  and  potential  lenders.  substantial  lender  number  the  The  of  is  there  will  perceived  were  confidence,  The  venture.  alternatives  project If  to  throughput  the  number  c o n s t r a i n t s would be the  f i n a n c i a l requirements o f the U n i t e d  various lending  of  legal  S t a t e s , C a l i f o r n i a , and  the  institutions.  f i n a n c i n g package i s important t o the p r o j e c t as both a source o f  funds and Pacific this  an  Rim  package  make a  i n d i c a t i o n o f how countries) should  d e c i s i o n to  analysis to  the of  frameworks c o u l d be c o n s i d e r a b l e .  such a l a r g e j o i n t  and  which  different  objective  in  not  view the be  the  ( e s p e c i a l l y i n Japan and  project's f e a s i b i l i t y . deciding  proceed, i t w i l l  shows an  factor.  not  or  implementation  n e c e s s a r i l y be  (248)  financing stage  The  I f the  a t t r a c t i v e p r o j e c t beyond the  interest rates the  others  is  schemes. to  minimize  other  cost  of  developers based on  an  sensitivities The the  financial cost  of  funds f o r t h e l i f e framework d e c i d e d  5.  Organizational  This  of the p r o j e c t given  t h e c o n s t r u c t i o n management  by t h e owners.  Start-Up  i s an important  operational  task  during  t h e implementation phase.  (overseeing  the  Both an  construction/engineering),  a d m i n i s t r a t i v e o r g a n i z a t i o n must be s e t up t o manage c o s t s , funds,  report  activities are  progress  voting  authorities,  to  whether  rotating operational  are differences  functions  should  be  Stevedore  would  the administration.  committee  with  o f the engineering  the c o n s t r u c t i o n would  likely  s c h e d u l e s were d e p a r t i n g engineering  from  contractor  expenditure  at this  internally  the  from  project  the operations  partner  the  would  management  would oversee t h e  and c o n s t r u c t i o n .  on an e x c e p t i o n  administrative  (249)  and  proceed  and CMC  construction  basis  s u b s t a n t i a l l y from t a r g e t s . and  policy  point i n  stage t h e involvement o f t h e s e n i o r be o n l y  aspects  In t h e Long Beach case i t  should  each  other  i n the operations  generated  An e n g i n e e r i n g  representatives  d e t a i l e d aspects  management  manage  of  administrative  of opinion  management  that  host  disburse  The important  and  senior  previously  a  chairmanship,  the  agreed  Metropolitan  During  complete  o r h i r e d from o u t s i d e t h e group.  been  manage  general  There  administrative  had  rights,  and  formulations.  partners  and  s i m i l a r t o most new o r g a n i z a t i o n s .  the  respect  t o owners,  and  group  partner  i f costs or  Otherwise, t h e  would  manage t h e  project.  The  supervise The  developer's  details  of the  administrative  engineering  engineers  group  would  and  also  management  sub-contractors' solicit  Metropolitan  and  CMC  as o p e r a t i o n  and  a d m i n i s t r a t i v e managers.  would  need  to  committee  major  would  performance.  proposals  from  as t o the t a s k s t h e y would perform i n t h e i r r o l e  r e l a t e to  costs  agreed  Charges f o r these s e r v i c e s  to  earlier  i n the  conceptual  stage.  6.  Commencement' o f N e g o t i a t i o n s Warehousemen's Union (ILWU)  In  most  terminal  w i t h "the  p r o j e c t s , the  critical  part  of  the  partners  have  been  union  implementation  somewhat  INternational  negotiations phase.  insulated  from  this  Stevedore p r e v i o u s l y agreed t o accept  stevedoring  operations  on  dollars) .  Metro  provided  project's  conceptual  had  an  design  established detailed  would  In  Metropolitan  escalation  were used were  tied  to  this  price  very  case,  the  problem  manning  level  because  (in  levels  the  the  manpower  increases  in  The  costs.  &  a  and 1982  for  f o r which they were c e r t a i n they  derive to  be  the management  get the c o n c u r r e n c e of the l o c a l union management. schedules  Longshoremen  the could  detailed cost Indications  stevedoring  direct  of and  i n d i r e c t contract benefits.  D.  CONTRACTING  A terminal primary  throughput c o n t r a c t i s a secondary agreement p r e d i c a t e d upon a  export  s a l e s agreement between  (250)  a mine owner/agent  i n the  United  States  and a t r a d i n g house/agent/end user  i n a Pacific  Rim c o u n t r y .  The  d e t a i l s o f t h i s p r i m a r y c o n t r a c t w i l l u s u a l l y determine r e s p o n s i b i l i t y f o r the p o r t l o a d i n g f u n c t i o n . will  be t h e l a s t  one n e g o t i a t e d  components o f r a i l maximum  a f t e r the higher  and s h i p have been f i n a l i z e d .  flexibility  recognizes  A d d i t i o n a l l y , t h e t e r m i n a l agreement t y p i c a l l y  in  the port  dealing  function  with  the  as b e i n g  cost  logistics  system  This allows the shipper  transportation  the l e a s t  cost  "chain"  component  and  i n the  system.  1.  The'Terminal  Contract  The  purpose  primary  of a  throughput  commercial/operational/legal shipper to  and t e r m i n a l  the  allocated The  with  maintenance  respect  will  payment  guaranteed  some  control.  timing,  performance  obligations  services  o f the f a c i l i t y ,  which These  will will  require  be items  additional  that  i s wet o r o t h e r w i s e  The commercial terms r e p r e s e n t  the t e r m i n a l o p e r a t o r s  f o r normal l o a d i n g  (251)  as  be  levels.  as p a r t  and equipment  such  and  Costs w i l l  of the  These w i l l be items such as wharfage, l a b o u r  in detail.  coal  t o the  terms r e l a t e g e n e r a l l y  h a t c h e s , c l e a n i n g h a t c h e s , standby time w a i t i n g handling  acceptable  t o demurrage/dispatch.  accept  and o p e r a t i o n  Additionally,  i s t o s e t out the  are  invoicing,  t o the terminal  owner  throughput r a t e .  which  The commercial  charge,  according  terminal  specified  owners.  loading  responsibilities  terms  contract  costs, repair.  costs  are  opening/closing  f o r ships or t r a i n s ,  not f r e e  flowing,  and f i r e  t h e charges f o r s e r v i c e s by operations.  The  contract  shipper one  another.  cost of  The  the  operation  assessment  elucidated. the in  also  be  shipper  the  will  also  there the  the  operational efficiency  i n the  ultimate  minimum  customer.  performance  owner w i l l  Amounts/rates aspect  o f the  are  also  agree t o h a n d l e ,  of  coal  contract  for  storage  is critical  and  will  to  s i m i l a r c l a u s e s he w i l l  are  d i f f e r e n c e s between the  shipper  terminal  rail  interface, The  there  the  have i n  a s e t of n o t i c e s a t d i f f e r e n t ships,  their  needs, and  discharging/loading  The  legal  " b o i l e r p l a t e " represents  in  relation  t o damages and  operations  contracts  could  be  the  terminal  as  extra  o p e r a t i o n a l s e c t i o n s o f the  agree t o e s t a b l i s h p l a n n i n g  t r a i n s or  terminal  or ocean t r a n s p o r t  s p e c i f y what r e s p o n s i b i l i t i e s  of  the  result  inefficient  terminal  by the s h i p p e r .  shipper w i l l  arrival  for  to r o t a t i n g cargo, weighing, blending,  terminal  ships i n t e r f a c e with  guaranteeing  should  and  ship contracts.  extent  to  owner  agree t o d e l i v e r , a s p e c i f i e d number o f u n i t t r a i n s  This  and  terminal  p o s s i b l e p r i c e t o the  charges  specified.  experienced  The  this  as i t must be c o m p a t i b l e w i t h  relate  regard  best  shift.  agreement and  will  and  In t h e o r y  eight-hour  the r a i l  To  and  the  promote the maximum o p e r a t i o n a l  T y p i c a l l y the  shipper each  i s to  modes.  how  t r a i n s , t e r m i n a l , and  purpose o f s t a t i n g and  levels  each o f  The  terms r e p r e s e n t  agree t o have the  performance of  operational  will  they costs  contract accept  in  q u a l i t y sampling, e t c .  s c h e d u l e s which g i v e  the  time i n t e r v a l s r e g a r d i n g  the  cargo  volume  and  type,  storage  programs.  the  liabilities. (252)  division It sets  of  responsibilities  f o r t h the  relevant  law, and p r e s c r i b e s t h e n o t i c e and l e g a l a r b i t r a t i o n p r o c e s s e s . will to  s p e c i f y when r e s p o n s i b i l i t y another  and  responsibility. instances are  such  made  what  Also s p e c i f i e d  measure  of  of others  from  to injuries  parties  or t h e i r  o r damage t o persons  agents).  of  this  Warranties  indemnifications l o s s e s which a r e  and which  c o v e r e d under p r e s e n t i n s u r a n c e p o l i c i e s i n e f f e c t relate  transfer  Additionally,  the r e s p e c t i v e p a r t i e s  the r e s p o n s i b i l i t y  the  from one p a r t y  a r e t h e grounds f o r f a u l t i n c e r t a i n  as s o l e n e g l i g e n c e .  to protect  rightfully  i s the  f o r t h e c o a l passes  This  may  i n fact  be  (these p r i n c i p a l l y  or personal property o f the  o f workmanlike procedures  o p e r a t i o n s w i t h i n the r e l e v a n t laws a r e e x p r e s s l y s t a t e d w h i l e  and other  g e n e r a l w a r r a n t i e s a r e d i s c l a i m e d by a l l p a r t i e s .  The  l a s t major item i n any c o a l l o a d i n g c o n t r a c t i s t h e Force Majeure  clause.  This  penalty control  under  allows  the p a r t i e s  certain  circumstances  escape  (usually  performance war,  acts  o f e x p o r t s , e t c . , o r o t h e r major c i r c u m s t a n c e  c o u l d n o t have been r e a s o n a b l y agreement). prevented exempted  to  In t h e event  from from  foreseen  o f such  a t t h e time  circumstances,  c a r r y i n g out t h e i r  obligation  liability  non-performance  due  to  under  without o f God,  changes which  of the contract the party  being  the c o n t r a c t i s while  the force  majeure c o n d i t i o n e x i s t s . t  2.  The C o n t r a c t as a S o l u t i o n to" U n r e s o l v e d D u r i n g t h e Development Phase  A  major  project  such  as t h e Long  (253)  Beach  I n t e r n a l / E x t e r n a l Problems  Terminal  will  have  many  residual  problems a t t h e c o n c l u s i o n o f t h e development phase.  of  problems w i l l  these  others w i l l the  be generated  d e c i s i o n making, b u t  a r i s e as a r e s u l t o f i n e v i t a b l e o v e r s i g h t s on t h e p a r t o f  developers  or their  consultants  example would be i n c o r r e c t emissions  by d e l a y e d  Some  used  during  manufacturer  i n calculations).  the planning  specifications  These  phases (an  on p o l l u t i o n  problems must  be r e s o l v e d  between t h e p a r t n e r s , o r between the p a r t n e r s and o u t s i d e a g e n c i e s i f t h e p r o j e c t i s t o proceed  successfully.  a l t e r n a t i v e i s t o formulate contract  Sometimes t h e o n l y a v a i l a b l e  r e s t r i c t i v e o r c o r r e c t i v e language i n t h e  document which w i l l  serve t o c o r r e c t these  residual  problem  areas.  In  the  name  political were  expediency  maneuvering  left  These  of  unresolved  items  could  and  usually  by t h e j o i n t  by  effective  c o o r d i n a t o r s , a number o f items  by t h e p a r t n e r s represent  supported  during  differences  t h e development  of  opinion  phase.  between t h e  Japanese and American p a r t n e r s r e g a r d i n g an o p e r a t i o n a l , c o s t i n g , o r s e r v i c e i s s u e s r e l a t i n g t o the t e r m i n a l . suppressed  w h i l e major items  not  the operations  until  problems s u r f a c e . changes  t o respond  continue  planning  These items  t e n d t o remain  t o be r e s o l v e d .  It i s usually  sessions  begin  that  these  past  In many cases i t w i l l be t o o c o s t l y t o make d e s i g n t o the m a j o r i t y  desires.  The c o n t r a c t must be  c o n s i d e r e d as a means o f r e s o l v i n g these i n t e r n a l r e s i d u a l problems.  An the  example would be t h e Japanese p a r t n e r s annual  throughput  contract  (254)  initially  guaranteed  as  wanting  storage  15% o f  for their  customers.  The  American p a r t n e r s  proportional  guarantee.  completed and  the t o t a l s t o r a g e  of  the  major  guaranteed  for  At t h i s p o i n t , i t may as  free  nominal  storage, charge,  significant  be  incremental  for  this  have  been  criteria.  of  the  10-15%  storage  provision.  of  This  i n the  t o be  needs t o  as  allowable  but  to  are  remedies  is  the  also  customers the  owners  these  items  During  unresolved  the  course  of  what  down had  contract  from been  these  agencies  anticipated,  document.  An  one  example  r e s p o n d i n g t h a t the  which of  would  the  primary  be  the  permitting  been  completed,  major  (255)  to  be  concluded.  changes  at  air  l e v e l of p a r t i c u l a t e  the  process  If  differ  m a r g i n a l l y h i g h and would need t o be m i t i g a t e d t o  had  or  the  environmental agencies.  e m i s s i o n s was  work  the  e i t h e r more e a s i l y r e s o l v e d ,  r e g u l a t o r y and  q u a l i t y management d i s t r i c t  terminal  a  T h i s i s p r i m a r i l y a r e s u l t o f the slow response  handed  from  at  a  i n f i n a n c i a l or c o n t r a c t terms which a s s i s t s i n  time from a number o f the  considerably  only  the  resolve.  during  are  resolved.  but  development p r o c e s s  Many e x t e r n a l  responses  the  carrying  compensate  partners.  development p r o c e s s .  be  storage  s e t t l i n g these t y p e s o f i s s u e s between the  issues  is  regarding  T h i s would a l l o w  difficult  implementation phase t h e y t e n d  phase  agree t o 5% of throughput  throughput  i f they r e q u i r e d  more  design  problem  throughput  customer.  Earlier  much  more e a s i l y d e s c r i b e d  and  smaller  a l l o c a t i o n has been f i n a l i z e d as p a r t  t h a t the p a r t n e r s  5-10% and  engineering  a p a r t i c u l a r customer  charge t o the  the  would  The  construction  portion  c o u l d want a s i g n i f i c a n t l y  this  If  final  point  allow design  would  be  extremely through  expensive.  specifying  in  have minimum s p a c i n g and  would  contract  be  The  r e s o l u t i o n of  the  contract  or  that  that  further  size  indicate  that  conditions  would r e q u i r e i n d e m n i f i c a t i o n  any  relating  cost  to  unit  fines  or  The"Framework f o r  The  coal  contract  terms  can  general  sensitive coal end  terminal user w i l l be  of  pays a  ultimate affect  the  coal  i t can  be  cargo.  The  o f the  owners from  terminal  penalties  imposed  these  by  the  area.  seller will  f o r the  terminal  party  negotiating  the  negotiating  usually  function. the  The  terminal  process  quite  ultimate  bill  sales contract.  will  control  In the  for  coal  frequent  loading port.  i n the  United  the  case o f an  reasonably a n t i c i p a t e d that  c o n t r o l the  c h o o s i n g the t e r m i n a l . rate  "fines"  with  The  the  the  cost ocean  Pacific  exception  States  c o a l t r a d e ) i s an FOBT s a l e where the producer may  load  to  f o r reasons which w i l l be c o v e r e d s h o r t l y .  whoever  (which may  the  significantly  areas  need  non-compliance  other  i s responsible  and  loading operations  In  made  Negotiations  which p a r t y  sales  be  include  of the  p r i m a r y c o a l s a l e s c o n t r a c t between buyer and  specify  could  t r a i n s would  f o r 70%  regulatory authorities s p e c i f i c a l l y i n this  3.  problem  c o a l q u a l i t y would not  a minimum 2 - i n c h p l u s  could  this  to  West Coast  Rim this  steam  have the o p t i o n  of  In t h i s case the producer must u s u a l l y assume  guarantees,  vessel  (256)  demurrage/dispatch,  and  other  obligations.  The  four  primary  steam c o a l  the West Coast steam c o a l t r a d e are as  (i)  FOR  —  load  F r e e On R a i l . the  coal  delivery  of  into the  responsibility  CIF  —  Cost  transport loaded  at  delivered trading trade,  coal  C  S  F  and  Pacific  price.  a  is  excluded. ultimate  Rim  In  the  companies CIF  port  user  the  and  turnover  of  i s aboard  the t r a i n  at  With  basis  costs  case  will and  these  of  form  are  part  of  P a c i f i c Rim  likely  terms, a l l  the c o a l has been o f f -  destination,  a v e r y major  role  for  the  the  total  n a t i o n s where  i n the  coal  import  be  selling  to  the  undertaking  a l l the  purchase  final and  negotiations/risks.  identical  to  Insurance end  final  Freight.  These  companies p l a y  on  the  w i t h h i s equipment and  c l a s s i f i c a t i o n yard.  account.  transportation  (iii)  to  cars  i n s u r a n c e expenses u n t i l  these  users  follows:  i s made once the c o a l  the  producer's  rail  Insurance  and  terms t o be used i n  Under these terms the producer agrees t o the  the producer's r a i l  (ii)  sales  CIF  except  becomes  user or t r a d i n g  the  that  the  insurance  responsibility  company once the  coal  of  is the  i s aboard  the t r a i n a t the p r o d u c e r ' s c l a s s i f i c a t i o n y a r d .  (iv)  FOBT  —  purchaser  Free will  On take  Board  Terminal.  delivery  (257)  o f the  With coal  these on  board  terms the  the ocean  v e s s e l a t a l o a d i n g p o r t t o be named (depending on t h e d e t a i l s of  the contract  or  user's).  terminal  The  rigor  the port  choice  may be e i t h e r t h e p r o d u c e r ' s  The producer/agent  loading  i s responsible  for r a i l  and  charges.  o f the n e g o t i a t i n g  process  appears  t o be a f u n c t i o n o f :  (a) t h e t e r m i n a l p r i c e as a percentage o f t h e t o t a l s a l e s p r i c e under the  p a r t i c u l a r terms; and (b) how much o f t h e s h i p p i n g  market  risk  the c o a l producer must a c c e p t t o f a c i l i t a t e t h e s a l e o f h i s c o a l .  If  the c o a l e x p o r t market was c h a r a c t e r i z e d by v e r y h i g h demand and o n l y marginal  supply,  i t could  be a n t i c i p a t e d t h a t  a l l of the producers  would be a b l e t o s e l l t h e i r p r o d u c t on the b a s i s o f f r e e on r a i l mine site.  This  their  possible  and/or  trading  whether risks,  would  shift  e s c a l a t i o n over  they w i l l with  o f the t r a n s p o r t a t i o n  the c o n t r a c t  period  or purchaser  be a t t e m p t i n g the l o g i s t i c s  that  to negotiate  takes  c o s t s and  t o t h e end u s e r  company whichever was t h e p u r c h a s e r .  i t i s the s e l l e r  provisions  the r i s k  Regardless o f on t h e  the best  rate  components a f t e r f i n a l i z i n g  shipping and term  the s a l e s  agreement.  In  some  cases  the  producer/purchaser  may  prefer  to  accept  shipping r i s k s .  T h e i r d e c i s i o n would be based on a b e l i e f t h e y  translate  shipping  An  example would be a p r o d u c e r p r e f e r r i n g FOBT terms b a s i s a b e l i e f  that  t o American  prices  into  negotiations  terms o f t r a n s p o r t a t i o n c o s t s .  profits  could  f o r themselves.  American  lower  the  will  produce  better  results i n  On an FOBT p r i c e b a s i s , t h e t e r m i n a l  (258)  price CIF  or  sold it  as  a percentage  C &  on  F basis.  the  basis  is difficult  port  o f the  charge  of  A d d i t i o n a l l y , the  terminal  in relation  to  the  an  not  an  have  FOBT background  t o argue a defence o f  ocean  f r e i g h t saving  Long Beach deep water f a c i l i t y .  charge i s the r e s p o n s i b i l i t y o f the end contract.  Against  operators large  than on  producer/agent may  a particular port.  f o r the  a v a i l a b l e t o the  s a l e s p r i c e i s much h i g h e r  the  which i s  T h i s ocean f r e i g h t  u s e r and  not p a r t o f the FOBT  ( T h i s assumes t h a t economies o f s c a l e w i l l  p r e v a i l i n the  ocean s h i p p i n g market.)  In  the  with CIF of  FOR  the  sales  concept,  t r a d i n g house or  s a l e s the t e r m i n a l the  total  price.  owners would be chosen  as  it  significantly conditions.  the  ultimate  In  the  minimizes  FOR  basis  American U.S.  t h r o u g h West Coast p o r t s , i t can most  difficult  and  negotiations  f i r s t l y t o FOBT c o n t r a c t s .  be  from  ship for  onerous  negotiate responsible by  will  be  a  The  contracts  (259)  and  Terminal  site  has  This  terminal  been is  charge  West Coast e x p o r t steam  viewpoint  will  CIF c o n t r a c t s w i t h the  difficult  with  the  a CIF o r C & F s a l e taken p o s s e s s i o n  and coal the  producer involve  contracts  Japanese  a  relate  expected t o  least  company t h a t has  site.  the  costs.  the  terminal  f o r a l l t r a n s p o r t a t i o n and  a Japanese t r a d i n g  a t the mine  FOR  F  reasonably a n t i c i p a t e d that  C & F and  negotiations.  C &  Long Beach  c a r r y i n g the t r a n s p o r t a t i o n r e s p o n s i b i l i t y can be less  i n the  lie  l e s s conspicuous p o r t i o n  a position that  rail  negotiating  In terms o f  and  As  s i t u a t i o n , the  from  the  responsibilities  purchaser.  cost i s a smaller  negotiating  better  transportation  end  to user  negotiated of the  coal  E.  SUPPLY/DEMAND VARIABILITY  Chapter  2 has a l r e a d y d i s c u s s e d the p r i c i n g mechanisms t h a t may  coal sales to  ( i . e . w o r l d p r i c e , ROI c r i t e r i a , e t c . ) .  T h i s has been expanded  cover o t h e r i s s u e s and terms i n v o l v e d i n a throughput agreement b i n d i n g  the p r o d u c e r s , t r a n s p o r t components, and u s e r s on a long-term basis.  An i m p o r t a n t concept t o e x p l o r e i n t h i s a r e a i s the  between  the  variation  parties  outside  in  of  variability  i s seldom  significant  thermal  the  the  event force  of  c o n s i d e r e d as  coal  There a r e two i s the  concept.  The  or  supply  supply  side  evident there i s a producing  sector  b a s i c t y p e s o f l o n g term agreements used i n the c o a l t r a d e .  "take  or  pay"  concept  where the  more  ordered. In  producer/user's  contract.  responsibility  countries.  is  escalation  contractual  demand  o v e r s u p p l y i n the Western U.S.  and pay  contract.  significant  i t i s currently  annual tonnage from a producer not  a  majeure  which would s e r v i c e the P a c i f i c Rim  One  be used i n  The this  other case  ability  agreements  the  to at  agrees  t o purchase  an  f o r such tonnage amount even i f i t  popular  contract  continue  specified  user  to  concept  is  continuity  is  negotiate  intervals  the  "evergreen"  based  acceptable  during  the  life  on  the  pricing of  the  I f t h e y a r e unable t o come t o an agreement d u r i n g one o f t h e s e  negotiating  intervals  the  contract  is  cancelled  with  no  resulting  penalties.  The  strict  market.  take  or  Variations  pay  c o n t r a c t s are  o f these may  rare,  especially  be used i f a producer  (260)  i n today's i s bringing a  coal new  mine on  stream  contract Pacific  to  shifts  satisfy  a particular  requirement.  the r i s k between producer  and  The  purchaser  Rim market s u p p l y and demand c i r c u m s t a n c e .  depending  relation  to  negotiations.  a  South  African  When demand  low  i s high  cost  the  p a y i n g h i g h p r i c e s under the evergreen  In r e a l i t y , not  the t r a n s p o r t a t i o n  expect  Otherwise  to receive the  any  producer  purchaser  and/or  faced  with  agent/trading  either  guarantees  trading  house  the  ( i f the  c o n t i n u e ) or some take o r pay capital  on t h i s type o f c o n t r a c t . 5  million  demand  ton  over  million  per  year  concept.  a particular  period  t o n s per year f o r 3-4  tonnage i n l a t e r y e a r s .  than  need t o p r i c e  during  those o f the be  ship  of  can  producer.  assuming  from  the  a  risk  producer/  continues transportation  will  T h i s becomes burdensome i f major  Long Beach f a c i l i t y )  for  the  escalation  t e r m i n a l and  concept  Although the purchase  throughput  may  T r a n s p o r t a t i o n component owners  contract  e x p e n d i t u r e s (such as the new  the  increases his r i s k  company would  evergreen  sales  on  concept.  o u t s i d e the scope o f the s a l e s agreement. are  producer  components o f r a i l ,  better  type  In times o f low demand  and h i g h s u p p l y the r i s k i s s h i f t e d t o the producer who in  evergreen  15  end  are p r e d i c a t e d  c o n t r a c t may  years,  due  u s e r s may  stipulate a  t o a decrease  reduce  tonnage  to  in 1  y e a r s i n the hopes o f u s i n g the i n c r e m e n t a l  T h i s s i t u a t i o n can be c a t a s t r o p h i c t o mine owners  o r t r a n s p o r t f a c i l i t y owners who  have undertaken major c a p i t a l expenses i n  a n t i c i p a t i o n o f a r e l a t i v e l y smooth income stream.  The  Pacific  contract  Rim  tonnage  c o u n t r i e s have commitments  and  a  poor  this  record  i s likely  (261) •a  of  living  up  to continue.  to  their  They have  seldom  taken  their  full  annual  contract  commitments  from  South  Africa,  A u s t r a l i a , o r Canada.  Presently the  the  producers  financial and  burden o f  logistics  (and  i t appears w i l l  area  o f tonnage g u a r a n t e e s .  coal  industry  be r e l u c t a n c e who  market.  On  not  systems  continue to  component  accept)  the  Pacific  represent this  basis  appear  to  be  term  Rim  long  the  demand v a r i a b i l i t y and  success  the  have  U.S.  end  on  accepted in  the  West Coast steam  p u r c h a s e r s know t h e r e  the  shared  primarily  l o o s e l y worded c o n t r a c t s  A d d i t i o n a l l y , w i t h the  i n i t s infancy,  falls  owners who  t o r e s o r t t o l e g a l remedies a g a i n s t  companies  does  demand v a r i a b i l i t y  will  a l i m i t e d number o f u s e r of  the  developing  export  financial responsibility users  will  not  maintain  r e s p o n s i b i l i t y f o r s u b s t a n t i a l decreases.  In  the  s i t u a t i o n of  anticipate against  the  guaranteed a r e not  that  the  mines  a  supply  side  transportation  ( i f their  Presently,  i n s i s t i n g on  take or pay  capital  sector  contracts  tonnage).  with current  v a r i a t i o n , i t i s more  the  would r e s o r t t o  were of  equipment and  the  and  sector  t e r m i n a l , as the negotiate  can  have no  smallest  concessions  better  ocean s h i p p i n g  to:  (a) t h e y are  areas  of  sectors operating  (b) as s t a t e d e a r l i e r  terms than the  to  remedies  guaranteed tonnage i s o n l y used  the mines t o q u a l i f y f o r a p r e f e r r e d " r a t e " ; and transport  legal  substance i n the  railroad  tonnages due  reasonable  s a l e s agreement.  by the The  l i n k i n the l o g i s t i c s c h a i n , w i l l be u n l i k e l y t o  beyond  those  given  to  the  rail  or  ocean  sectors.  Even though major c a p i t a l e x p e n d i t u r e s are r e q u i r e d , i t i s unreasonable t o e x p e c t t h a t s o l i d take or pay  c o n t r a c t s w i l l be a v a i l a b l e .  (262)  The  U.S.  West  potential  i f the  t a k e or pay The to  coal need  Coast  steam  p r o d u c e r s and  contracts  commit  trade  capital  not  develop  to  its  t r a n s p o r t a t i o n system owners r e q u i r e  i s i n the  major  funds  p o s i t i o n of being  towards  without a s o l i d c o n t r a c t u a l b a s i s . t o assume t h a t new  will  p r i o r t o t h e i r committing to s e r v i c e t h i s  export terminal to  coal  mines w i l l  improvements.  industry.  first  development  of  solid  component this  trade  As the t r a d e develops i t i s r e a s o n a b l e  open and  These  the  the  full  the r a i l r o a d s w i l l a l s o make major  improvements  will  likely  be  without  the  comfort o f s o l i d guarantee c o n t r a c t language but a t l e a s t t h e r e w i l l be established point  of  track  view  suppliers,  record  of  the  i s that  of  purchases  Pacific  investments  normal b u s i n e s s r i s k s .  Rim  users,  i n the  They are  from  coal  the  West  and  a  Coast.  number  chain  of  at t h i s  i n d i c a t i n g t h a t the  The  present  the  Western  time  represent  needs o f the  Rim  c o u n t r i e s have been o u t l i n e d i n d e t a i l b a s i s t h e i r c o n v e r s i o n  to  coal  in  industrial  many and  diversifying their on  of  the  utility  This  sectors.  need  to  is  far  from  Furthermore,  accepted  extent  s a t i s f a c t o r y to  as  as  stations their  the growth and  a business  facility.  (263)  risk  Pacific from o i l  and  other  interest  in  t h a t t h e y need r e l y l e s s be  any  r e g a r d e d as a major group  commitments t o a s e c t o r o f the  I t appears t o some e x t e n t be  power  s i n g l e major producer should  c o n s i d e r i n g major f i n a n c i a l system.  generating  s o u r c e s o f c o a l t o the  A u s t r a l i a as t h e i r  commitment.  electric  an  of  developers  coal  logistics  s t a b i l i t y o f demand w i l l  f o r the  first  major  terminal  F.  CONCLUSION  The  implementation  terminal must  of  a c o n t r a c t i n g phase i s an  development p r o j e c t .  change  constraints  The  o r g a n i z a t i o n and management s t r u c t u r e s  significantly  from  have  conceptual  replaced  e x c i t i n g p a r t o f a major  the  conceptual  phase.  requirements  as  Timing the  and  most  budget  important  f u n c t i o n s t o be managed.  T h i s phase i s r e l a t e d p r i m a r i l y t o c o n s t r u c t i n g the pre-established this  phase  analysis.  which  contracting  the  were  Some  construction  countries  guidelines.  of  with  deferred  these  design.  Others  terminal  This  anticipated  during  will  from the  result  may  the  are  or  can  will  users.  many i s s u e s  unanticipated  issues  w i l l determine the  project.  There  be  to  export  f i n a l contractual be  planning  substantially stages.  this variability.  (264)  be  the  resolved  risk  according  surface  through  market t o  the  feasibility changes  in  through  the  Pacific  Rim  from, the  proportion  to  during  which i s a c c e p t e d  different  A high  demand v a r i a b i l i t y and  that  during  resolved  need  The  terminal  by risk  of t h i s  risk  contractual protections  from  CHAPTER 7  CONCLUSION  A.  INTRODUCTION  The  hypothesis  significant venture. of  of  effect  the  paper  upon  the d e c i s i o n  Project  making  structure  and management  has  of a  problems i n the Long  I t i s concluded  that  issues  last.  joint  Technical  Beach  the d e c i s i o n - m a k i n g  as p a r t o f a m u l t i - p a r t i c i p a n t j o i n t v e n t u r e  the t r a n s p o r t a t i o n  a  s t r u c t u r e upon the management  and i n s t i t u t i o n a l  are described.  p r o c e s s e s which e v o l v e serve  organizational  The impacts o f t h e o r g a n i z a t i o n a l  many t e c h n i c a l , s o c i a l ,  Coal  i s that  transportation  often  problems  a r e t h e l e a s t complex a s p e c t s o f t h i s t e r m i n a l development program.  The  paper  uses  t h e Long  Beach  International  demonstrate a number o f m u l t i - f a c e t e d development size  of a coal  and the number  terminal.  the  multi-participant  structures,  This  (LBICP)  to  i n the  p r o j e c t , because o f i t s f i n a n c i a l offered  an o p p o r t u n i t y  to  The important i s s u e s r e l a t e d p r i m a r i l y t o  decision  the i n s t i t u t i o n a l  Project  a s p e c t s o f problems i n v o l v e d  of p a r t i c i p a n t s involved,  examine a wide range o f i s s u e s .  Coal  making  obstacles,  processes,  the  management  and the r e s o l u t i o n o f  diverse  o b j e c t i v e s among m u l t i p l e p a r t i c i p a n t s .  The  primary o b j e c t i v e  management  structures  was  to generalize  to f a c i l i t a t e  t e c h n i c a l and i n s t i t u t i o n a l  about  the a b i l i t y  d e c i s i o n making  problems.  (265)  of  various  which c o u l d  resolve  To  develop  the  g e n e r a l i z a t i o n s , the  the  scenario  following  support  objectives  were  included:  (a)  To  set  Coast  f o r the  development  of  the  United  States  West  steam c o a l e x p o r t t r a d e .  (b)  To a n a l y z e the competing p o r t  (c)  To  sites.  d e s c r i b e the j o i n t v e n t u r e management s t r u c t u r e o f the Long Beach  project.  (d)  To  analyze  how  the d e c i s i o n making p r o c e s s e s  worked i n r e l a t i o n to a  number o f problems.  (e)  To  illustrate  the m u l t i - d i m e n s i o n a l  a s p e c t o f a major t r a n s p o r t a t i o n  project.  (f)  B.  THE  To examine a number of the i n s t i t u t i o n a l problems i n d e t a i l .  MARKET  During  1980/81,  forecasted  the  substantial  steaming c o a l . fuel the  growth  of  Rim  increases  This strategic  electricity  sources.  Pacific  countries  of  in  requirements  Taiwan, for  and  Korea  thermal  or  energy r e s o u r c e would be used p r i m a r i l y t o  g e n e r a t i o n networks.  the  their  Japan,  Their plans c a l l e d  A u s t r a l i a n , Canadian,  and  United  for stimulating  States  coal  T h i s would enhance c o m p e t i t i o n and a s s u r e a d i v e r s i t y o f  (266)  supply supply.  C.  THE  At  U.S.  SOURCE  the  time  of  this  c o u n t r i e s , the U.S.  originating  million  tons  place,  to  P a c i f i c Rim  The  in  Utah,  year.  i t appeared  capability  interest  at  by  and  Wyoming  U.S.  the  western  forecast  states  the  Pacific  were  less  expansion  would  have  s h o r t and medium term  railroads  operating  to  the  than  2  programs i n  the  productive  requirements  of  West  Coast  from  the  coal  and i n c r e a s i n g c a p a c i t y f o r a number of There  was  c a p a c i t y on most l i n e s c a p a b l e o f h a n d l i n g a n t i c i p a t e d volumes f o r 2-3  missing  y e a r s without a d d i t i o n a l c a p i t a l  component  i n the  logistics  would  need  to  be  capable  large  volumes  of  export  of  receiving,  coal.  A  expenditures.  system  e f f i c i e n t , b u l k h a n d l i n g f a c i l i t y on the U.S.  or  " c h a i n " was  west c o a s t .  handling,  terminal  of  storing,  this  the f i n a l the  smallest  l i n k i n the l o g i s t i c s  type  other  system i t i s important  a l r e a d y e x i s t i n g modes.  component  of  the  delivered  dependent upon i n c r e m e n t a l investment  coal  With the price  by r a i l  (267)  a modern,  Such a  loading  is a  capital  As t h i s i s  that i t interfaces  t e r m i n a l charge  and  facility  and  i n t e n s i v e u n d e r t a k i n g w i t h a f i n a n c i n g h o r i z o n o f 20-25 y e a r s .  with  Rim  i n i t s infancy.  They were a n t i c i p a t i n g the steam c o a l export e x p a n s i o n .  least  The  coal  With mine development and  the  satisfy  Colorado,  p r o d u c i n g areas had been upgrading  excess  steam  buyers.  principal  years.  in  west c o a s t steam c o a l p r o d u c t i o n was  Exports  per  renewed  the  and m i n i n g  project  as  the  success  sectors within 4  years,  the  excellent the  development  opportunity  project  criteria  risks  to  inception.  t o view  were  substantial.  see major  management  The  structures  The L B I C P . d e v e l o p e r s had  t h e growth o f the steam  LBICP  coal  offered  developed from  substantially  trade  an  different  than management o f  o t h e r l o g i s t i c s system components w i t h c a p i t a l c o s t s a l r e a d y sunk.  D.  MULTI-PARTICIPANT JOINT VENTURES  D e c i s i o n making example during  i n a j o i n t venture  i s an extreme case c o n s i s t i n g the  ultimate  phase,  development  objective  terminal.  To  allow  the  anticipated problems magnitude  across of  joint from  these  the  required  the  the two  complete  decision  and  joint  the  Port  of  criteria  criteria lines.  This  organizational  ventures.  of both j o i n t development  had  Long  i n the  LBICP  ventures a  common  Beach  coal  development  separated It  would  The  joint  ventures  organizations  venture  efforts  joint  develop the  decision  joint  interrelated  promoter/sponsors.  institutional  cooperative to  to  two  venture  different  c o o p e r a t i o n between and  was  o f two  The  for different  two  that  phase.  which  investor/operators  full  i s a complicated process.  was  initially  cause  was  the  the  significant case.  problems  The  encouraged  I t became o b v i o u s t h a t the v e n t u r e managements would phase  and  continue  be  with  implementation.  E.  ORGANIZATIONAL ISSUES  Establishing the  a management framework was  development  phase.  The  the f o u n d a t i o n o f the success o f  paper has d i s c u s s e d  (268)  the committee  framework  u t i l i z e d by have  the  worked  partners  more  and  suggested a number of a l t e r n a t i v e s which  efficiently.  The  combination  of  t r a n s p o r t problems, major i n s t i t u t i o n a l o b s t a c l e s , and owner group became a major management  Some  technical  which  eased  the  diversity  of  difficult  for  phase  and  decision  objectives the  part  issues  and  the  between the  or  the two  process.  ' a g i t a t o r ' or  p o i n t s i n the d e c i s i o n - m a k i n g p r o c e s s i t was  The  individuals/companies  diverse  their  view  business  objectives of  the  technical  i n t e r e s t s which  construction  and  operation  transport  could of  joint  be  the  As  consultants  venture.  The  v e n t u r e s became the  development  r o l e s which became  The  executive  'too much d e t a i l '  etc.  At a number o f  Once  critical  to r e s o l v i n g the  expected  to  terminal.  and derive  (b)  their  on i t s own  Despite well  benefits  from  P o s i t i o n s taken on  the  a number to  financially.  a number o f s h o r t f a l l s , the  committee s t r u c t u r e worked  even w i t h i t s cumbersome machinery.  sub-committees  (a)  associate  o f i s s u e s c o u l d have i n d i c a t e d the l a c k o f requirement f o r the t e r m i n a l stand  by  issue.  major p a r t i c i p a n t p o s i t i o n s : process,  a  committee  expected t h a t r o l e p l a y i n g  would be c r i t i c a l  stemmed from two  by  joint  overcome.  the r o l e s were e s t a b l i s h e d they were not changed.  particular  a multi-participant  handled  companies assumed  d e c i s i o n making  'negotiator'  were  within  framework t o  i n d i v i d u a l s and  of  r o l e s would be  within  technical  challenge.  problems  making  committee  proceeded,  material  institutional  highly  may  added  d i f f e r e n t personal  (269)  The  reasonably  c o m p o s i t i o n o f the  i n t e r p r e t a t i o n s to  various  a particular  company's o b j e c t i v e s . project  the executive  committee based  on  clearly  allowed  s i t u a t i o n c o u l d be e x p e c t e d , i n t h i s  committee became e m b r o i l e d i n a r b i t r a t i n g o p e r a t i n g  differences.  committee l e v e l . have  Although t h i s  I t s function  prescribed  should  have been t o make  alternatives  sourced  at  Other o r g a n i z a t i o n a l concepts d i s c u s s e d  the executive  committee  a better  decisions  the  operating  i n t h e paper may  opportunity  to function  principally at a policy level.  F.  INSTITUTIONAL PROBLEMS  Institutional  obstacles  presented  a  significant  c o m p l e t i o n o f t h e p r o j e c t development phase. the  paper  were  finance.  The  the aspects ability  of  of the  to  the  The two areas h i g h l i g h t e d i n  environmental project  deterrent  permitting  sponsors  to  and  project  overcome  these  i n s t i t u t i o n a l o b s t a c l e s was p r i n c i p a l l y a f u n c t i o n o f t h e i r w i l l i n g n e s s t o contract  outside  project  financing,  barriers  of  a  consultants. and  magnitude  The i s s u e s  government that  of environmental  relations  t h e combined  presented  resources  permitting, institutional  of the  sponsor  companies were unprepared t o t a c k l e .  Some  of  unknowns. project  these  problems  contained  They were c h a r a c t e r i z e d as p r e s e n t i n g sponsors  implementation upside/downside do  institutional  not lend  throughout  periods.  Engineering  sensitivities.  themselves  the  many  unquantifiable  the greatest r i s k s t o the  development,  construction  and  c o s t i n g data can be q u a n t i f i e d w i t h  Most o f t h e p r o j e c t  to definitive  (270)  institutional  c o s t / r i s k comparisons.  issues  An example  could  be t h e p a r t i c u l a t e e m i s s i o n s from t h e t e r m i n a l  practical It  EPA and SCAQMD t e s t s a r e made a f t e r t h e t e r m i n a l  i s p o s s i b l e the terminal  (due  to inaccurate  This  could  and  expensive  of  the  The f i n a l  i s complete.  e m i s s i o n s c o u l d exceed p e r m i s s i b l e  engineering  cause d e l a y s  o r changes  i n final  i n the p o l l u t i o n  permitting  engineering/construction  engineering/permitting  permitting.  G.  sources.  subject  changes.  standards, standards).  t o completing  timely  There i s no p o s s i b i l i t y  contractor/consultant  guaranteeing  the  This r i s k l i e s s o l e l y with the p a r t i c i p a n t s .  BEHAVIORAL ASPECTS OF'JOINT VENTURE MANAGEMENT  The  a b i l i t y o f t h e p r o j e c t t o proceed on schedule was n o t dependent on t h e  t e c h n i c a l s o l u t i o n s t o t h e t r a n s p o r t a t i o n problem. the  organization's  processes.  management  structure  I t became dependent on  and t h e e v o l v i n g d e c i s i o n making  The r o l e s o f t h e key t r a n s p o r t a t i o n e x p e r t s  subordinated Individuals non-transport  to  the  "generalists"  who demonstrated aspects  an a b i l i t y  o f t h e program  c o n t i n u i n g t h e development.  within  the  became somewhat  participant  group.  t o a s s i m i l a t e t h e t r a n s p o r t and  emerged  as t h e m o t i v a t i n g  Only a few o f t h e members  force i n  i n v o l v e d were a b l e  t o t r u l y see d i r e c t i o n through t h e complex m u l t i p l e i s s u e s .  A  large  joint  differences loyalties  venture  from  a  such  single  as t h e Long large  Beach  corporation.  project  has  distinct  In t h e l a t t e r  case,  a r e u s u a l l y d i r e c t e d towards o b j e c t i v e s o f t h e o r g a n i z a t i o n as  i n d i c a t e d by incumbent management.  With t h e Long Beach j o i n t v e n t u r e t h e  group was t r y i n g t o agree on t h e o r g a n i z a t i o n a l s t r u c t u r e and management  (271)  format  which  could  institutional  issues.  degree o f m a t u r i t y investment maturity  The time  best  control/manage  the  A d d i t i o n a l l y , most  multiple  organizations  by t h e time t h e y would c o n s i d e r  project.  The  Long  Beach  technical  project  would  chances o f success spent  i n a new  pre-planning  the  business  venture  organization  I f more p l a n n i n g  t h e committee  development  i n these  are a f u n c t i o n of the  structure  and  areas had been  decision  a  The  approach  (Bechtel,  of  to anticipate  The  companies was  focus  plan  have  likely  etc) assigned for  a  been  to  conceptual appoint  the r e s p o n s i b i l i t y  complete  terminal  a of  including  Such a c o n s u l t a n t , i n my o p i n i o n , would be more  establishing  capabilities. partner  Fluor,  comprehensive  p e r m i t t i n g and f i n a n c i n g .  would  making  undertaken a t t h e  s t r u c t u r e would not have been used f o r t h e  phase.  consultant  presenting  capable  dollar  such o r g a n i z a t i o n a l  commencement o f t h e c o a l t e r m i n a l p r o j e c t , i t i s r e a s o n a b l e  project  a  as i t a c c e l e r a t e d i n t o t h e development phase.  framework.  that  have  a 250 m i l l i o n  lacked  and  a  development  towards  a  team  "hands-on"  with  proven  management  project  style  by  the  implemented p r i o r t o t h e i r f u l l u n d e r s t a n d i n g o f the  major d i f f i c u l t i e s i n v o l v e d i n completing  the conceptual  development phase  o f a major t r a n s p o r t i n f r a s t r u c t u r e p r o j e c t .  Once  s t a r t e d i n the committee  change.  The  unanticipated  management  than  may  have  process  problems a r i s e .  membership were f r e q u e n t . been  o r g a n i z a t i o n a l format, i t i s d i f f i c u l t t o then  Changes  in  becomes designated  reactionary operating  The c o n t i n u i t y o f the p l a n n i n g  possible  through a  (272)  single consultant  as  new  committee  e f f o r t was format.  less These  effects  were m i t i g a t e d  by t h e a d a p t a b i l i t y ,  b u s i n e s s judgement o f t h e p a r t n e r s '  Despite  the  objectives,  management and  institutional  joint  venture  development phase p r o g r e s s e d v e r y n e a r l y the  r e s u l t o f two f a c t o r s :  joint  coordinators  abilities skills time,  business  (b) towards  objectives  of  the  on s c h e d u l e .  individuals Their  the  T h i s was p r i m a r i l y  with  personal  Rim  countries were  studies,  i n a holding  excellent  energy  political  and management  the development program was completed on  participants  g e t t i n g the p r o j e c t  diverse  interrelationships  t h e end o f t h e development  engineering/environmental  H.  powerful acumen.  i n the P a c i f i c  obstacles,  (a) t h e members o f t h e e x e c u t i v e committee and  were used t o ensure t h a t and  market  and  were  excellent  s e n i o r management.  structure,  complicated  f l e x i b i l i t y , and  softened shifted  stopping  pattern  phase, t h e steam  considerably.  The  main  finalizing  the  expenditures,  and  towards  further  coal  u n t i l the market improves.  THE PROJECT FUTURE  The p r e c i p i t o u s  fall  i n o i l prices  i n late  s u p p l y has stemmed the t i d e o f r i s i n g Many  o f t h e major  have been  revised  electrification  short-term  projects  t o use a l t e r n a t e  1982 combined w i t h e x c e s s o i l i n t e r e s t i n steam  i n Japan, Korea, and Taiwan  f u e l s than c o a l .  These p l a n t s  burn o i l u n t i l the economics o f steam c o a l again appear a t t r a c t i v e . difficult speculated  t o p r e d i c t when steam c o a l w i l l make i t s r e s u r g e n c e . t h a t major  thermal c o a l  (273)  will It i s  I t i s now  e x p o r t s from the U.S. west c o a s t  not b e g i n u n t i l 1986-87.  coal.  will  The  LBICP t e r m i n a l  p r o j e c t has  environmental p e r m i t t i n g . long-term support  throughput  the  base  presently handling complication  is  financing  be  repeated,  available  and  can  be  the  renew  partner  design  not commenced. facing  more  Institutional  problems f o r the d e v e l o p e r s  even w h i l e  (274)  Such  permits  interest.  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