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Monday, November 24, 2014

Panama Canal Expansion Update: October 2014 Milestones

By Christine M. Walker

The Panama Canal connects the Atlantic and Pacific Oceans and joins North and South America. It is one of the narrowest waterways in the world, yet thirteen to fourteen thousand ships brave the Panama Canal each year because it links greater than one hundred and forty-four maritime routes, one hundred and sixty countries and seventeen hundred world ports.

To accommodate for the safe passage of larger ships, on October 22, 2006, the citizens of Panama voted on an expansion project for the Panama Canal which will effectively double the size of the waterway. While industry insiders question if the expansion will result in any diversion of cargo from United States western seaports, most agree that the expansion will increase the competition among eastern seaports because utilization of Panamax ships could result in fewer overall ship voyages.

Currently, the Ports of Norfolk, Baltimore, New York and New Jersey are deep enough to accommodate Panamax ships. To match those ports accommodations, other United States eastern seaports have initiated dredging projects to allow the bigger ships to enter their ports. To that end, several eastern seaports saw milestones in their dredging projects during October 2014.

After many stalls due to funding fights between state and federal lawmakers, on October 8th, Georgia officials signed the final paperwork to begin dredging the Port of Savannah. Although the dredging project will be receiving financing through both federal and state funding sources, to expedite the beginning of the project, Georgia agreed to begin financing the project with state funds.

The Port of Charleston will also receive federal and state funding, but an October study on the dredging project allocated two thirds of the $509 million dollar budget to South Carolina with the outstanding one third of the budget to the federal government. The Port Miami, on the other hand, faced a Motion for Preliminary Injunction that threatened the progression of its $220 million dollar dredging project due to concerns about the impact of dredging activities to nearby coral.

During a daylong evidentiary hearing on October 23rd, the parties reached a compromise in which the Plaintiffs withdrew their Motion in exchange for the Army Corps of Engineers reading into the record that the dredging methods utilized would minimize environmental impact on the surrounding coral. Dredging has since continued uninterrupted.

Moving forward, while the ultimate economic impact of the Panama Canal expansion on United States seaports remains unknown, eastern seaports demonstrated in October 2014 a commitment to remain competitive and position themselves to receive any benefits that the expansion may avail.

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