OHPA needs second tugboat to fullfill $1.2 million federal grant or face foreiture of grant assets

The Ocean Highway Port Authority and Port of Fernandina operator Savage are working frantically to meet the requirements of a $1.2 million federal grant that will necessitate the purchase or lease of a second tug boat capable of handling cargo barges.

The clock is running out on OHPA's obligation to begin the barge service from the Port of Fernandina to other ports in order to significantly reduce semi-truck traffic in and out of the port. If the conditions of the grant are not met, OHPA would be required to repay the U.S. Department of Transportation Maritime Administration (MARAD) the $1.2 million. In its grant application, OHPA said it expected to have barge service to Savannah, Ga., and Charleston, S.C.

In February 2021, OHPA used the majority of the MARAD funds to purchase the tugboat Fort Clinch. But the 21-meter long tug. built in 1986, is designed for docking and vessel departures only.

"The Ft. Clinch is not designed for barge service and cannot operate in that capacity," said Port Executive Director David Kaufman. "Another tugboat would be needed to handle a barge service for different products. The Ft. Clinch would assist in the docking of the barges."

Savage, which took over port operations in 2022, submitted a "white paper" to MARAD in July requesting more time to negotiate potential barge cargo contracts with potential customers. In its request, Savage identified a business in North Charleston, S.C. that was being shuttered and as a result "will generate a void in the consumption of the specific cargo within the market. This closure will result in excess cargo that will ultimately need to be transported and moved

where other businesses can utilize and consume the specific cargo."

The business is a WestRock mill that produces containerboard, uncoated kraft paper, and unbleached saturating kraft paper, with a combined annual capacity of 550,000 tons.

"There's a business opportunity there utilizing a barge service into the Port of Fernandina which would eliminate a fair amount of truck traffic off the local highways," Kaufman said. "All of this is very confidential and we're working with Savage and local companies to accomplish the conditions of the MARAD grant."

How OHPA would find the funds for the purchase of a second tugboat is problematic. The district just passed its 2023-24 budget that has a $24,000 cushion. OHPA cut costs by eliminating Kaufman's position of port director. He is in his final 60 days in that position.

"It may be that Savage purchases the tugboat or that a third-party vendor with a tug and barge is contracted for the service," Kaufman said.

In its response to the Savage proposal, MARAD sent OHPA a list of requirements to move forward on the grant which included:

1. Please provide an update on any developments that have occurred in the past two months since the White Paper was submitted regarding the new proposed Marine Highway Service.

2. MARAD must determine that the new proposed project is an eligible Marine Highway Project. Therefore, MARAD requests that you identify the specific cargo/commodities that will be moved on the Marine Highway Transportation Service, what ports will be served by the service, and what the projected shipping schedule will be. As a reminder, the definition of marine highway transportation can be found at 46 USC 55601.

3. MARAD also requests that OHPA provide Letters of Commitment from the business(es) that will be the customers of this service. We understand that this may be confidential business information. Any information that you consider to be a trade secret or confidential commercial or financial information, you may provide to us in a document that complies with the following: (1) state on the cover of that document that it “Contains Confidential Business Information (CBI)”; (2) mark each page that contains confidential information with “CBI”; (3) highlight or otherwise denote the confidential content on each page; and (4) at the end of the document, explain why the information you are submitting is CBI. DOT will protect confidential information complying with these requirements to the extent required under applicable law.

4. Please provide the expected timeline for starting the new proposed Marine Highway Service.

5. Additionally, please inform us where the tug is currently located and when it was last used to assist in cargo operations.

Kaufman said OHPA through Savage answered MARAD's request for information in an email late Monday.

Savage reported to MARAD in July that "OHPA and Nassau Terminals (Savage) will also continue to broaden their

shared business development focus to investigate any opportunity that includes moving containers by barge. To aid this effort, Nassau Terminals parent company, Transportation Infrastructure Partners, recently hired a full-time business developer, Matt McPhail, who is focused entirely on generating business for its port operations at the Port of Fernandina, and its Carolina Marine Terminal, located in Wilmington, North Carlina. OHPA and Nassau Terminals continuing goal is to bring more business and trade to the Port of Fernandina and remain committed to generating opportunities that utilize the marine highway and the U.S port network to move cargo along the U.S. East Coast and to international markets."

Reached by the Observer, McPhail was reluctant to discuss ongoing negotiations with potential barge service customers.

"It's sensitive, competitive, and confidential conversations that are taking place," McPhail said. "I cannot disclose any more information."

OHPA and Savage requested that MARAD extend the deadline for grant compliance to the end of 2023 to "develop the Specific Cargo Project and enter into an agreement, or at a minimum develop terms for a commercial agreement."