The South Coast Air Quality Management District (SCAQMD) has proposed new fees on containers moved through California seaports. On March 3, the SCAQMD adopted a “comprehensive clean air blueprint” that it said would improve the health and lives of all residents across its region by reducing ozone and particulate matter emissions as required by the federal Clean Air Act.

The SCAQMD said the plan seeks to reduce ozone to 80 parts per billion by 2023 by reducing emissions of nitrogen oxides (NOx) by 45% from current rules and regulations, and an additional 10% reduction in NOx to meet a requirement to reduce ozone to 75 parts per billion by 2031. SCAQMD analysis indicates that it will take $1 billion per year over the next seven to 15 years. The SCAQMD said the amount of funding needed to achieve the NOx emission reductions associated with the further deployment of cleanest engine technologies proposed in California’s “mobile source strategy” and its air quality management plan is “on the order of $1 billion per year if funding is available beginning in 2017.” The SCAQMD may provide funds to create incentives to replace older, dirtier trucks, particularly those used to dray containers to and from the ports; increase the number of ships that are “cold ironing” or using shore power when in port; and to fund so-called “sock on a stack” systems, where exhaust fumes from ships are captured and cleaned while they are docked.

Since most containers through the Ports of LA, LB and Oakland are 40-ft containers, new fee proposals will range between $70 to $200 per container, which can be significant enough, say to drive discretionary intermodal rail cargo to other ports, such as to the Pacific Northwest or Canada.

In the case of ports like Oakland, which generate significant local exports within their catchment areas, these fees might be significant in making US exports less competitive if there are reductions in ocean service. This could impact exporters as they may not have economically viable routing alternatives to markets in Asia. In fact, the State of California as a whole is a huge manufacturing center, with competencies in machinery, aerospace, and medical products. The combination of huge Silicon Valley, auto R&D and a global logistics hubs makes California ripe to build inbound/outbound production/distribution activity. An important part of this potential is dependent on capitalizing on California’s logistics connectivity though its seaports.

There is never a particularly good time to impose fees such as these, but it appears to a particularly bad time, given the potential rise in freight rates caused by ocean carrier consolidation, which reduces the negotiating leverage that shippers have through any particular gateway.  From accounts provided, there seems to be lack of clarity and therefore potential lack of accountability on specifically how the funds collected would be applied. There is definitely a case to be made for positive incentives that create more comprehensive air quality solutions in metropolitan California, for example more actively pursuing rail shuttle connections to inland distribution centers.


JOC: SCAQMD California Container Fee Proposal