Submitted by Suanne Z. Thamm
Reporter – News Analyst
October 24, 2016 2:00 p.m.
During the October 19, 2016 monthly meeting of the Ocean Highway and Port Administration (OHPA) District 4 Commissioner Carrol Franklin appeared less than pleased following the report of September activity at the Port of Fernandina. He directed a series of questions and observations to Val Schwec, Commercial Director for Kinder Morgan, Nassau Terminals, LLC, the port operator, in an attempt to better understand why business at the Port of Fernandina appears to have either remained static or dropped off this year.
Schwec discussed Hurricane Matthew’s impact, which resulted in the delay or cancellation of some shipping. Schwec said that whereas the port was ready to resume operations the Monday after the storm, the US Coast Guard delayed reopening of the channel for another day. This caused some vessels to divert to other ports. He said that the port facility sustained only minor damage that was readily repaired within a few hours. Thanks to low tide, the rising waters never reached the warehouses or lumber, and all employees were safe.
Schwec reported only 5 vessels visited in September, accounting for 11 dockage days. He said that year-to-date shipping has been flat compared to last year. Port revenue was $90,000 for September, with year-to-date revenue at $1.3M, slightly below last year.
Following Schwec’s September business report, Franklin remarked that it was “the worst report of the year.” He said that Schwec is routinely telling commissioners that numbers will improve, but that does not seem to happen. He asked, “Are you trying to [promote] our port or what?”
Schwec replied, “I don’t promise anything; I just try to forecast.” He added that tonnage and income can vary considerably from month to month and might be better analyzed on a quarterly basis.
Schwec spoke to the challenges facing the port today, indicating that Nassau Terminals is attempting to create tonnage at a reasonable revenue “one customer at a time” to pay off outstanding bonds. He reported that the cost of a tug at the Port of Fernandina is more than twice that of Jaxport, even though the distance traveled is dramatically shorter in Fernandina. He added that congestion on A1A is a factor in decisions to use Fernandina as well.
Franklin countered, “Some people say we need a port manager,” expressing his disappointment that higher level executives of Kinder Morgan have never appeared before OHPA to answer questions.
Schwec told commissioners that they could hire a port manager to work directly for them any time and that would not affect his job at all. OHPA’s relationship with Schwec’s employer—Kinder Morgan Nassau Terminals, LLC—is laid out by contract. He went on to explain more challenges that the Port of Fernandina faces in attracting business. He said, “We don’t have a Latin American connection in Northeast Florida, because Miami has that market.” He also said that Asian shipping involves larger ships than Fernandina handles. Commercial lines such as Tote and Crowley are moving toward LNG vessels, which are fueled in Jacksonville.
Schwec also reminded OHPA commissioners that unlike many ports around the state, Fernandina receives no public subsidies. Jaxport receives a $6M annual subsidy from the city of Jacksonville, whereas Fernandina has to fund operations and debt from its revenue.
District 1 OHPA Commissioner Richard Bruce said, “We are not going to price ourselves out of business. We can’t afford a rate increase.”
Schwec said that the bottom line is that Fernandina has its niche market—mill products and break bulk cargo—but it takes time to build it up.
Not to be deterred, Franklin continued, asking whether Kinder Morgan is helping to promote the Fernandina Port. Schwec said that Franklin’s analogies with consumer goods could not be applied to industrial goods. “Our advantage,” Schwec said, “is we have the mills. We need to work with them.” Franklin said, “I may have to accept [what you say] but I still ask why.”
Editor’s Note: Suanne Z. Thamm is a native of Chautauqua County, NY, who moved to Fernandina Beach from Alexandria,VA, in 1994. As a long time city resident and city watcher, she provides interesting insight into the many issues that impact our city. We are grateful for Suanne’s many contributions to the Fernandina Observer.
I wish to thank Commissioner Franklin for taking a financial interest in the workings of the Port. Unfortunately there will not be enough revenue generated this year to cover the $1.6 million debt payment. It is great to say that the Port is here to service the mills, but when that does not generate enough revenue to cover debt, according to their agreement Kinder Morgan must cover the bond payment shortfall and the Port becomes further in debt to Kinder Morgan. The Port already owes Kinder Morgan millions. And the bond balloon payment of $6 million comes due in 2020. Does anyone know what happened in the recent contract negotiations with Kinder Morgan?
I’d like to second Ms. Ross. I think Comments of Commissioner Franklins, to Kinder Morgan, about the continued Financial Malaise at the Port are spot on. Seems in the first half of each year, there’s an article (by someone) about “Good News at the Port, Activity is up, Tonnage is up” Then at the close of each year, Something always Happens. The Statement by Candidate Sturgess at the Forum is telling, and concerning, He said “How the Port lost $500,000 last year, and the Commissioners seemed happy about it, because the Year before they lost $800,000. Difficult questions need to be addressed at the Port, As Faith said there is a $6,000,000.00 balloon payment on the Bond,(2020) that’s just around the corner, and the Port Authority, gets Deeper and Deeper in the Pockets of Kinder Morgan. Seems to me 6 million is a cheap Firesale Price, for Kinder Morgan to pick up the Port. At the moment what incentive does Kinder Morgan Corp. have for increasing profitability at our Port.? If the strategy is for them to Purchase our Port at a Firesale price. there is none. If Nassau County want to continue to be in the Port Business, they need to start talking about a Financial Strategy to Bale the Port Authority out. Just in case.