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Issues Involved in the State Ports Authority's Expansion Plans
March 2002

FOLLOW-UP (PDF)     REPORT (PDF)     SUMMARY (PDF)

The South Carolina State Ports Authority (SPA) has been planning to build a new marine cargo terminal complex on a 1,300-acre, undeveloped piece of land it owns on Daniel Island. The full scope of the plans for the $1.2 billion terminal, called the Global Gateway, were unveiled in a draft environmental impact statement published in September 1999. Almost immediately the plan was opposed by major environmental and citizen groups and local governments in the Charleston area. In June 2000, the General Assembly passed a provision requiring the authority to obtain legislative approval prior to constructing a terminal or railroad on Daniel Island. In February 2001, the SPA announced it was withdrawing the permit for the Global Gateway and was planning a scaled-down terminal on Daniel Island.

Because questions and uncertainties continue to surround the SPA’s expansion plans, members of the General Assembly asked us to conduct a performance audit of the authority. Using available information, we reviewed the major issues involved in the proposed terminal expansion. Our purpose was to clarify the information needed by the General Assembly so that it can make an informed decision when the SPA requests permission to build a terminal on Daniel Island. Our findings include:

  • The economic impact of the port is measured in jobs, revenues, and taxes. The SPA attributes a total of 83,085 jobs to port operations. However, only about 5,326 of these jobs are directly created by the port. If the SPA implements its development strategy, additional jobs are projected to occur in the area of port industry employment and indirect "spin-off" jobs, not manufacturing jobs.
  • The SPA’s chief customers, and thus sources of revenue, are the containership lines with which it has contracts and major port users which import and export goods. The SPA has reported that South Carolina-based businesses account for about 32% of the cargo imported or exported through Charleston.
  • The SPA’s 1998 Business Plan and Project Feasibility Study projected a 5.8% compound annual growth in the numbers of containers shipped through Charleston. We found no evidence that contradicts this projection. Similar rates of growth are projected across different trade routes and for other U.S. ports.
  • The SPA is efficient in the use of its current land assets. We found, however, a wide variation in the SPA’s use of container storage space and room for improvement in the management of empty containers.
  • Other factors that are driving the perceived need for a new terminal include SPA’s concern that it could lose a major containership contract, its need for new sources of revenue, its competition with the port of Savannah, and general shipping trends such as the increase in vessel size, which in turn places additional demands on ports to provide larger berths and more space for container storage.
  • The draft environmental impact statement (DEIS) did not completely address possible environmental impacts of SPA expansion plans on Daniel Island, and the process was terminated when the SPA withdrew its request for the Global Gateway permit. However, major questions remain about the destruction of wetlands, traffic congestion, dredging, and the impact on air and water quality. At least one state agency has commented that Daniel Island may be the least desirable terminal location from a natural resource or social perspective.
  • The SPA projects that the first phase of a new terminal on Daniel Island will cost $451 million. However, this does not include funds already expended ($56.6 million); the cost of a railroad; and improvements to existing interstate roads. The source of funding is also problematic. SPA’s own revenue sources are inadequate. It may not be feasible to attract private funding, and there are already other priorities and commitments for funding with state general obligation bonds.
  • Prior to 1992, the SPA investigated several potential terminal sites in the Charleston harbor. Excepting the former Navy Base in North Charleston, which was studied several times, the SPA did not seriously consider other sites for a new terminal once it bought the land on Daniel Island in 1992. An important part of the DEIS process also was to consider alternatives to the proposed Daniel Island site. The DEIS has been criticized for its analysis in this area; it relied on information provided by the SPA’s contractor and did not provide an in-depth analysis of the alternatives.
  • A plan to develop a container terminal on the Savannah River in Jasper County presents an opportunity for a new, large-scale container terminal. Under the same criteria that the SPA has applied to Daniel Island, the Jasper County site is comparable or superior in most areas.
  • We reviewed the extent to which the State Ports Authority is accountable to the General Assembly and the public. The SPA has been given broad powers by its statutes, and legislative controls over the authority are limited.
  • We found that the SPA has attempted to charge Freedom of Information Act requesters thousands of dollars for non-confidential information. This may discourage requesters from obtaining needed information on SPA decisions which affect the public.

Conclusion
The issue that will come before the General Assembly is whether to grant the State Ports Authority permission to build a new terminal and railroad on Daniel Island. It will be difficult for the General Assembly to make an informed decision until the SPA reports more fully on certain critical issues:

  • The impact of port traffic on area roads and interstates;
  • How the impact on wetlands will be mitigated;
  • The potential cost and ultimate size of a terminal on Daniel Island;
  • The source of funding for a new terminal; and
  • Steps the SPA is taking to address the storage of empty containers.

The General Assembly will have to weigh the advantages with the disadvantages of expanding the port — whether, for example, the net economic gain outweighs the potential adverse consequences for the environment and the projected increase in traffic. Likewise, the SPA contends that, if it doesn’t expand, it could lose a major containership contract. This should be weighed against projections that the increase in global container trade will create enough demand so that both Charleston and its competitor, the port of Savannah, will have enough business to support both ports.

A possible terminal site on the Savannah River in Jasper County has emerged as a viable alternative to building on Daniel Island. While there are unresolved legal and environmental issues, a terminal on the Savannah River in Jasper County could deliver the same terminal capacity and economic development benefits as an SPA terminal on Daniel Island, but without many of the major drawbacks. It has been suggested that South Carolina and Georgia, instead of competing, should cooperate to develop a regional port on this site. Therefore, the General Assembly may wish to more fully explore terminal development opportunities on the Savannah River in Jasper County before it votes on a terminal on Daniel Island.