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Wednesday, August 15, 2018

William D. Friedman

President & CEO, Port of Cleveland

Posted 7/27/2018 11:05:56 AM

William D. Friedman (Photo: Port of Cleveland)

Port of Cleveland President & CEO and newly elected Board Chairman of the American Association of Port Authorities William Friedman weighs in on the Port of Cleveland and its role in the all important Great Lakes trades.

When the American Association of Port Authorities (AAPA) announced the election of Port of Cleveland President and CEO, William D. Friedman, to serve as chairman for the 2018-19 year, beginning this October, it was perhaps a conscious decision to tap someone who has a broad range of experience and skills in myriad ports, large and small. That’s Friedman in a nutshell. AAPA represents 140 of the leading maritime port authorities in this hemisphere. If you’ve seen one port; well, you’ve seen one port. In his role with the Port of Cleveland, Friedman has transformed the business model since taking the helm in 2010. Under Friedman’s leadership, the port has enjoyed a resurgence in maritime trade and cargo volumes. In 2014, he led the port’s efforts to launch the Cleveland-Europe Express service, revitalizing containerized shipping via the Great Lakes/St. Lawrence Seaway system and solidifying Cleveland’s position as its leading international hub. Moreover, the port’s economic impact has grown to encompass an annual average of over 13 million tons of cargo through the Cleveland Harbor, resulting in $3.5 billion in yearly economic activity and supporting more than 20,000 local jobs. He has ‘been there and done that,’ first in the ports of Indiana and then out in Seattle. He weighs in on what’s coming next, and why.

Your term as AAPA board Chairman begins in October. What will AAPA’s big focus be during your upcoming tenure?
The first word that would come out of my mouth is infrastructure. The association has identified 66 billion dollars that it believes that the ports nationally need over a 10-year time frame. AAPA is going to push Congress for funding to that level – for a combination of waterside and landside improvements. The top priority will be to advocate for funding. As you’re probably aware, we’ve been making very good progress with the harbor maintenance tax, moving toward full spend. I think the success has been a little spottier for ports with land side transportation funding through the various iterations of Tiger and Fast Lane grants. I’d like to see more dedicated freight funding as time goes on in recognition that it’s an intermodal system that needs to be adequately connected. You’re only as good as that weakest link.

You arrived in Cleveland in 2010. What’s changed here in the last eight years?
A lot. When I got here, this port was in a state of great uncertainty. There had been an effort to potentially relocate our primary docks to another location, and the theory was you could free up this space for redevelopment – of non-industrial, mixed lakefront redevelopment – and then build a new port, essentially, a little bit east of here using dredge material. And that had gotten some traction, but there are a lot of assumptions baked into all that that weren’t really feasible. Right before I got here, that whole idea had fallen apart. It left the port with a big problem, because that had been the solution for the dredge material. The idea was to take it all for the next 20 or 30 years, form up this new land mass, and we get this nice solution to dredging, where to put dredge material, and we get a modern, new port, we can move the port over there and we free up all this lakefront land. It sounded good, but it was going to be a really expensive project and nobody knew how to pay for it. Now, we’ve really got the dredging problem very close to solved. We immediately sort of put to bed this notion of moving the port, and we have come through a very long process with the Army Corps that included some litigation by the State of Ohio and the port. The Corps – in the middle of our big planning process – decided that the sediments were clean enough to just put out in the open waters of Lake Erie. The state of Ohio said no, we adamantly disagree. And then that matter got litigated in federal court and the court, essentially to make a long story short said, ‘We’re not going to decide this on technical grounds, but the State has the authority under the Clean Water Act to make a decision.’ So we’ve come through all that and we’ve got a solution – we actually put about 50 percent of the material, and more over time, into beneficial use. It gets used, as opposed to just being treated as a waste material and landfilled. So we feel good about that outcome.

Tell us about your business mix at the port.
Like most of the primary Great Lakes ports, we are an international business, seaway business, and then we have the domestic side. And the growth opportunities, as far as we’re concerned, are more on the international side. The industries that are served domestically – steel industry, construction – really aren’t the demand. It’s just we don’t see demand ramping up for iron ore at the integrated mill here, or for stone going into construction. That’s more of a protection mode – preservation mode. Let’s make sure we dredge, let’s make sure nothing happens that threatens the continued movement of the domestic commodities that are important, but they’re not going to grow a lot. It would be nice if they did, but the economic impact of moving those bulk commodities just isn’t as high as moving a container or higher value cargo.

What’s the biggest project underway right now at the port?
The Cleveland Europe Express – that’s our headline service. Our carrier is the Amsterdam-based Spliethoff Group. They’ve been our partner from the beginning. Nobody had cracked the container market here in the Great Lakes for decades. Seasonality, lock closures and limitations on the size of ships and all these things – people said it just can’t be done. We think it can be done, we’re trying to prove it out with Cleveland Europe Express, and that’s where we’ve had our priority. Equipment-wise, we have two new Liebherr mobile harbor cranes, and two reach stackers for container handling. We built a new building next to where we’re handling the containers for trans-loading, potentially, from domestic trailers to containers or vice versa, getting anything else out of the weather that needs to be out of the weather. We want to be the best equipped port on the Great Lakes. And we are. We’ve also worked very hard with CBP. CBP had never handled containers in the Great Lakes, and so for them, it was a big deal. They didn’t have the equipment and they had to staff up. To us, that’s a competitive advantage – we have something here that the other Great Lakes ports don’t necessarily have. And you put all that together, and we think we’re far and away the leading international hub here on the system. We’re up to probably about 4,000 TEU a year, which I know sounds ridiculously small, but that’s starting from nothing. In the Great Lakes, where we haven’t had scheduled liner container service for decades, we consider that an accomplishment. We’ve seen that we can beat the door-to-door transit time through an east coast port by up to about 10 days. There are things that for us to compete – for us to really grow and make this a 20,000 TEU per year service – we have to solve. That’s our goal; we’re not trying to be half a million TEU port. We’ve got trains a day, a lot of them stack trains, going by us between New York and Chicago, and it’s a constant reminder as I look out my window that we want to make some of that stop here. That isn’t happening yet. It’s all truck at this point. Is there some potential for rail intermodal at some point? Yes. We’ve tried to get the railroads to take more interest, but that’s a that is a long-term goal. We have quite a bit of rail capacity on the port – we are served directly by NS and CSX, and then we have a little switcher on the port, so we’ve got a nice setup. We built about 5,500 feet or so of track so we have this double loop. We can land a unit train on the port, pull it off, and move it out.

Talk a little bit about steel. There’s a lot worry about tariffs and other market conditions at moment.
We handle a lot of steel. Last year, we were probably just under half a million tons – it’s all from Europe – so we were, of course, very alarmed by the potential for tariffs on European-made steel. If we were to see the 25 percent tariff on steel from Europe or countries where we see our imports, it wouldn’t be good for us. It would be disruptive to the customers who depend on it. It’s labor-intensive handling that steel, supporting a lot of jobs in manufacturing facilities in this area. So it’s a concern. No question about it.

The wind farm business, if you believe local stakeholders, is about to explode. What’s your take for the port on that?
We’re in the lead on that, actually. For more than 10 years or so, there has been a group here in Cleveland that we are part of – it’s called LEEDCo – Lake Erie Energy Development Corporation, that has been trying to move toward a pilot offshore Cleveland. We’re really close to getting it built. And we believe it will. We want Cleveland to be at the forefront on the Great Lakes. It would be the first freshwater, offshore wind project in North America, and one of the few in the world. A lot of the engineering and the design work has been done, we’re well down the road on the permits, there’s a large Department of Energy grant in the waiting, there’s an arrangement at one of the big Norwegian installers to build a project. Some say that permits might be in place by October, but that’s a little optimistic.

What about the Jones Act? It’s always in play on domestic wind farm projects.
That is one of the challenges of the project. We’ve got some ideas, we’re creative and we think we can overcome. Remember, this is for a pilot. So whatever you do for a pilot, your costs are going to be high, but then as you scale up, you get the marine contractors bringing equipment in or building new equipment because they can see your return. But we think with a combination of a big enough barge and some modifications to a barge and putting a big enough crane on it, we can get the job done and not have to bring in European equipment or, essentially import equipment which we can’t do under Jones Act, so we work around it.

Looking around the country, each port seems to have a unique funding structure. What is the model here?
We largely have to survive on our own merits. We’re not getting a lot of support yet from state government. We are making progress. It’s a big part of what we do on a continual basis is to convince lawmakers in Columbus that it’s worth it to invest in our ports. I try to make that case by showing them what Georgia has done, what Florida is doing through the Florida Ports Council, and what Maryland is doing with Baltimore. Those states are driving economic development with their port investment strategies. Ohio is a big state. You’re not going to get a permanent line item in the budget overnight. So we’re working toward that. But we’re really dependent on our own revenues that we generate, and we are at the point now where, on an operating basis, we’re really self-sufficient. For capital, we’ve done well with grants – federal and state – which have allowed us to make some of the investments we’ve made in our equipment without debt. We also have a small tax levy here in Cuyahoga County, which is voter-approved. It’s meaningful to us, but we’re really trying to drive our own revenues. We’re trying to get our fair share of grant dollars. Another way we differentiate from some of the other Great Lakes ports is that we’re the main issuer of project revenue bonds for all sorts of projects throughout this area. So if you were to drive around here and look at almost anything new that’s been built, we’re usually an issuer of bonds, so we’re kind of the regional development authority, in addition to being a port, a maritime port. We earn fees off of that and that’s also an important source of revenue to us.

Los Angeles and Long Beach have been burdened with a mandate to go totally zero emissions by 2030. They’ve done a good job. Tell us about what’s happening here on the environmental front.
We’re not under pressure today, but we want to be prepared – we want to be ahead of either mandates or just pressure from the community to make changes that would mitigate any environmental impacts. We were one of the founding members of Green Marine. Green Marine is really the only maritime environmental certification program. I’m on the board of Green Marine. We’ve been certified for six years. That’s a tool we use to measure our progress against the important criteria. Our sediment management program is another indicator of our sustainability, the beneficial re-use of the sediment. And, the Cleveland Europe Express substitutes maritime transportation, burning less fuel at lower carbon emission, to bring that freight into Ohio. Even though we’re nowhere near where California is, the good news is that our ‘emissions profile’ is quite low today – we’re not a major contributor to the air quality concerns in our region, but we wanted to know what our baseline is. My view of the world is that whatever starts in California is eventually going to come to Cleveland, Ohio, and every place else.

The VIDA Bill just failed in the Senate. Does the Port of Cleveland have an official position on that?
We absolutely support VIDA. We push it mainly through American Great Lakes Port Association, which I also chair. So we’re lined up with the Lake Carriers and others on this. It’s a top priority for us. We can’t continue to have this patchwork of state and two federal sets of regulations. Carriers want to comply, but they don’t know what to comply with. Ohio, like most states, doesn’t want to lose their own ability to regulate. I would make the case to our governor and anybody else that if we want to be an active, competitive, international port; we are going to have to be consistent with IMO.

I understand that the cruise industry might be taking off here. Bring the readers up to speed.
On and off over the years, there’s been some cruise ships in and out of the Great Lakes, but it seems to be having a bit of a Renaissance here. We’re excited about it. These are small ships, with three operators in the system. And then we are hearing that others may take a hard look at coming into the Great Lakes. Last year we had eight or nine port calls. We’re going to double that this year. The point is that, for a lot of people, the ship itself IS the destination. That’s not the case here in the Great Lakes. The ships are not going to be the destination. The lakes are going to be the destination. It’s more like the European River cruises. They’ll be nice ships and people will enjoy them, but they’re going to get off at Mackinaw Island or Cleveland and go to the Rock and Roll Hall, or Chicago, etc.

When it comes to Great Lakes commerce, you’ve been given credit for coining the catch phrase, “we’re all in this together.” True?
I don’t know who’s crediting me for that, but sure. I’ll take credit. We are in it together absolutely, and so I think it has to be a regional effort as opposed to an individual effort if we are all going to succeed.


(As published in the July 2018 edition of Marine News)