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Utah Inland Port now says it will be lean and green. Experts are skeptical

The Union Pacific rail yard in South Salt Lake, May 20, 2023. Part of the Inland Port's new plan involves a push to get cargo out of trucks — and off the road — and onto railroads for distribution across the state and region.
Jim Hill
/
KUER
The Union Pacific rail yard in South Salt Lake, May 20, 2023. Part of the Inland Port's new plan involves a push to get cargo out of trucks — and off the road — and onto railroads for distribution across the state and region.

The following story was reported by The Utah Investigative Journalism Project in partnership with KUER.

The Utah Inland Port as it was imagined five years ago has come to a standstill.

In 2018, planners envisioned a 16,000-acre logistics oasis in the marshy scrubland northwest of Salt Lake City. Instead of buzzing with mosquitoes, the land would be humming with trucks filing into warehouses and workers loading freight for distribution throughout the region.

Since then, the vision has expanded beyond a sprawling sea of warehouses in the capital city’s northwest quadrant. Satellite hubs are progressing around rail lines near Cedar City as planners set their sights on developing facilities in Spanish Fork in Utah County.

Ben Hart, the new director of the Utah Inland Port Authority, said the agency is making a major pivot. The decision to not barrel ahead with major capital projects in Salt Lake City came from asking some fundamental questions about the project.

“How does [it] help the local economy here in Salt Lake City? How does that help people get better jobs? How does that help sensitive lands? And the answer is, it doesn’t.”

For Hart, it’s also time the state realized it needs to get off of roads.

“Utah is going to grow and grow and grow,” Hart said, “[and] you can’t spend and build your way out of this with new roads.”

Hart has been evangelizing this new mission ever since he took over as the director in September 2022, roughly the same time the Port was hit by a double whammy of audits that criticized the agency for a lack of transparency and non-competitive bids for questionable contracts.

Since then, Hart said the agency is planning first and building later. Instead of pushing ahead on spending from its $150 million in bonding authority on new capital projects, it’s hiring a consultant to find out what kind of facility makes the most sense for the northwest quadrant. Whatever is decided, he’s still confident that it can be smaller, smarter and sustainable.

The Utah Investigative Journalism Project consulted with leading experts on shipping, logistics and supply chain management to get their verdict on an inland port in Utah. They cast doubt on the vision of the Port being lean, green and successful.

Best coast?

The first problem experts noted is that the fate of Utah’s Port is tied closely to the health of global shipping from the West Coast — and that’s bad news.

Jason Miller, the interim chair of the Department of Supply Chain Management at Michigan State University, said West Coast imports have been on a steady decline for decades.

“The challenge is that the percent of Asian containerized imports entering the U.S. via West Coast ports has been steadily declining, with an especially sharp drop in 2022 given labor disputes,” Miller said. He said the peak for West Coast shipping was before the housing recession in 2006, and they’ve never truly recovered.

Miller notes that every time dockworkers go on strike in California, the ripple effects keep pushing importers to bring their cargo in through the gulf and East Coast ports. But it’s not just picket lines at Long Beach that Utah’s port planners need to worry about. Miller also noted that a major expansion was made to the Panama Canal, making it even more enticing for Asian shippers to head to the opposite side of the nation. Plus the reputation of West Coast ports took a hit during the pandemic-induced supply chain crunch.

“The port congestion issues in Los Angeles and Long Beach in 2021 scared a lot of people because they didn't get stuff in for the holiday season,” he said.

Manufacturing decisions on the other side of the world are also not helping the Beehive State as more electronics manufacturing shifts from China to India. Miller noted that more than 80% of imports from India come through the East and Gulf coasts.

“What that’s telling you is those containers are now for sure coming in through the East Coast and don’t really have a chance coming in through the West Coast,” said Miller.

The hinterlands

To really understand the problem of competition for the port means understanding the term “hinterlands” in logistics lingo.

The “hinterlands” refers to the area a port serves — where unloaded goods are then sorted out and distributed by truck, train or plane.

It’s useful to compare it to a local grocery. Your neighborhood store probably serves all the people around it. So the zip code it shares with its customers might be its “hinterlands” — where people come from and pick up milk and eggs and bring them home. Compare that to say a corner store that might just serve people on a couple of nearby streets — or a Walmart that might bring people to it from around the county.

In big picture shipping you move back up the supply chain to see what hinterlands a port serves.

For example, the world’s largest container terminal run by a single operator, the Yantian International Container Terminal on China’s Pearl River Delta, exports to Europe and North America.

“Now, when you are going to establish an Inland Port, then the key question is ‘how big of a hinterland do you serve?’” said Willy Shih, an economist with the Harvard Business School.

He said Utah’s position means it would directly compete against major players like Chicago and Dallas.

The U.S. Department of Transportation tracks all goods shipped across the country through the Bureau of Transportation Statistics. The data is used to forecast the freight tonnage and value of shipped goods into the future.

In 2023, they estimate the entire state of Utah will export nearly $171 million in freight. Dallas-Fort Worth alone will rack up over $655 million in 2023, more than three times the value of Utah.

Chicago will ship out over $831 million. That’s more than four times Utah’s forecasted freight values for 2023.

Shih cautioned that he hasn’t studied Utah’s market position in depth, but he is skeptical about competing against the big players. He thinks the Port could perhaps just serve the state, maybe Colorado as well. But it would still be a challenge.

“Salt Lake City is one of the nicest places to live in the whole country, right? I mean, it's a wonderful place, but it's also isolated,” he said. “So how much traffic is going to Utah that can justify that inland port?”

Port Authority director Hart believes Utah already has a market hungry for a local distribution system, and the Port will only help it grow and attract more business.

“We've got the best economy in the country right now,” Hart said. “And I wouldn't trade our economy for Chicago, for Kansas City or anywhere else, for that matter.”

Go big or go green?

Hart said the Port’s new pivot means they are not trying to turn Salt Lake City’s west side into something resembling Chicago’s west side.

Hart also said moving to rail would be a move toward greater sustainability. By increasing access to rail, the Port can help the state move away from its reliance on the trucking of goods. It’s something he said he’s already hearing a need for.

“We have shippers all over the state who are saying, ‘Please don’t make me send my goods into Salt Lake City on truck,’” Hart said, adding that “the roadway-based logistics system that we have right now is just incredibly inefficient.”

But putting environmental arguments aside, Harvard economist Shih said a successful rail system needs big volume, something Hart said is not the Port’s current focus.

Shih said while rail is better than trucks for the environment — it needs volume to make sense for shippers.

“I want a train every day or a train every other day so that I'm not waiting around in L.A., Long Beach or Northwest Seaport Alliance for a train,” Shih said. Otherwise, shippers will just decide to hire a truck instead.

While Shih thinks it might be possible for the Port to just serve Utah and surrounding states; others are less optimistic.

Robert Handfield is a professor of supply chain management at North Carolina State University who in recent years testified before Congress about supply chain woes brought on by the pandemic. He believes Utah would have to expand into other hinterlands.

“[Utah] is pretty far to L.A. and pretty far to Chicago. Pretty far even to Phoenix,” he said.

Handfield added other places closer to the West Coast — like Reno which has good distribution centers — make more sense.

“So what would be the point of putting a port in the middle of Utah? I don’t see it,” he said.

Hart, however, remains optimistic. He sees it as the future, and one he believes frankly is long overdue.

“I'm absolutely convinced if we would have started this 30 and 40 years ago, we'd have much cleaner air today. We would have much stronger rural communities today and we'd have much better, more sustainable communities as a result of all of this,” Hart said.

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