As uproar over Dubai firm’s bid to operate U.S. terminals subsides, port security remains woefully underfunded

By PAUL SEIDENMAN, Special Correspondent

The planned takeover of some terminal operations at major U.S. ports by Dubai Ports World (DPW) generated much heat and little light last month as congressional leaders and state and local government officials argued that the company’s ownership by the Dubai government presented an unacceptably high security risk because several of the 9/11 terrorists were from the United Arab Emirates or maintained bank accounts there.

With Congress rebuffing President George W. Bush by vowing to kill the deal, and opposition from the American public mounting, DPW abandoned its takeover bid March 9, announcing that it would sell or spin off its U.S. operations. Days prior, the company officially purchased the London-based Peninsular & Oriental Steam Navigation Co., which held contracts for terminal operations at U.S. ports, including New York, New Orleans, Baltimore and Miami. DPW holds interests in terminal operations worldwide, including ports in Germany, the Dominican Republic and Hong Kong.

The public outcry over DPW’s U.S. terminal bid, however, was in sharp contrast to the relative lack of political and press attention on related events. Only days before the purchase, President Bush appointed a senior DPW executive to be a top U.S. government official in charge of the nation’s maritime operations.

David Sanborn, DPW’s director of operations for Europe and Latin America, was nominated in January as maritime administrator, reporting to Transportation Secretary Norman Y. Mineta. The Maritime Administration is involved in a variety of key defense tasks, including the transport of materiel for U.S. troops during a conflict.

The appointment drew no public objection.

Also, the operation of U.S. port terminals by foreign firms is not new. According to the Port of Los Angeles, 80 percent of terminals at the sprawling facilities there are operated by American subsidiaries of foreign interests including entities from China, Hong Kong and Taiwan.

And the furor surrounding DPW’s bid did little, if anything, many officials argue, to address the more paramount concerns about security at U.S. ports.

“America’s port security challenge is not about who is in charge of our waterfront. The real issue is that we are relying on commercial companies largely to police themselves,” wrote retired Coast Guard commandant and former deputy secretary of Homeland Security James M. Loy in an editorial in the New York Times, which was co-authored by Stephen E. Flynn, senior fellow at the Council on Foreign Relations.

Loy and Flynn suggest constructing a “comprehensive global container inspection system that scans the contents of every single container destined for America’s waterfront before it leaves a port” as opposed to scanning a fraction of containers entering the United States.

Such a system, Loy and Flynn wrote, is not “pie in the sky” and cite Hong Kong as a working example where every container entering two of its busiest terminals passes through scanning and radiation detection devices. Images from the scans can be “scrutinized” by authorities “almost in real time,” and officials can then decide whether to load a container that “worries them.”

According to the editorial, the Department of Homeland Security “greeted this private-sector initiative with only tepid interest.”

Security issues, however, are not limited to the operation of terminal facilities that handle the ships and cargo. For many in government and industry, the primary concern long has been the security enhancements to 361 major ports mandated by the U.S. Coast Guard under the Maritime Transportation Safety Act (MTSA) of 2002, passed in the aftermath of 9/11.

The estimated cost of the required upgrades is huge, said a legislative assistant to Sen. Patty Murray, D-Wash., a member of the Homeland Security Appropriations Subcommittee.

The Coast Guard estimated in 2003 that the total costs of implementing the MTSA would be $7.3 billion, including $5.4 billion over 10 years to upgrade ports and other facilities. These are non-federal costs to be shared by industry and facilities operators, such as local port authorities.

The money would fund basic security improvements, such as port access control systems; perimeter security devices, such as video surveillance systems; communications facilities, including command-and-control centers for communications with first responders; and waterside security measures, encompassing patrol boats, radar and sonar devices.

The Bush administration instituted a grant program to offset some costs, but has requested only a fraction of the billions that would be required to fulfill the MTSA requirements. Requested grant funding for fiscal years 2002-2006 totaled only $46 million, for example.

However, Congress raised that figure to more than $700 million beginning in fiscal year 2002, or about $140 million yearly. For that same period, port security grant applications to the federal government totaled about $1 billion annually, Murray’s aide said.

The federal funding has been made available through the Port Security Grant Program, administered by the Department of Homeland Security’s Office of Domestic Preparedness, and earmarked to fund antiterrorism protection. Port and terminal facilities operators are eligible to bid through annual grant application “rounds,” but only if they meet the program’s standards, which are based on a complex risk-assessment formula, first implemented in fiscal 2005, that includes elements such as the distance to open water and the assessment of security threats.

Under this formula, only 66 ports were eligible to make grant applications in 2005.

Kurt Nagle, president of the American Association of Port Authorities, the Alexandria, Va.-based lobbying group whose members include 84 U.S. port operators, told Seapower the $708 million of grant money provided to date represented only 20 percent of the ports’ actual needs. Thus, some ports are investing their operational funds in security improvements.

“In 2005 alone, U.S. ports invested about $2 billion in total infrastructure improvements and, out of that, we had to divert about 25 percent, or $500 million, for mandated security improvements. That has taken money away from projects directly related to handling cargo, which is why we need more government money,” Nagle said.

For fiscal year 2006, Congress appropriated about $142 million for port security.

“Based on Coast Guard estimates, it really should have been about $400 million, which is the amount Congress should allocate yearly to the Port Security Grant Program,” Nagle said. “Also, all ports that handle international cargo should be eligible to apply for port security grants.”

An additional $33 million was raised for port security that year, but that was due to a 50 percent matching fund requirement imposed upon private companies applying for Port Security Grant Program money. Congress is increasing the funding, however, allocating $175 million for a future series of grants.

Adding to port operators’ frustration is the threat that the Port Security Grant Program might disappear as a separately funded entity in fiscal 2007. For the second time in as many years, the Bush administration has proposed folding the money into a broader fund termed the “Targeted Infrastructure Protection (TIP) Program.” TIP would provide security grants for all surface transportation. If this happens, “port security (funding) will become marginalized or lost in the shuffle,” Nagle predicts.

Murray’s legislative assistant also voiced concern that TIP, which was rebuffed by Congress last year, could result in less money for port security.

“The administration’s answer is that this is something that private industry should find a way to finance, at least in terms of making up any funding shortfall,” he said. “The problem is that the funding levels, to date, have put American ports in a very tenuous position, especially concerning compliance with MTSA regulations. What MTSA did was to create an unfunded mandate.”

Capt. Tim Mann, in the Coast Guard’s Office of Directorate and Compliance, disagrees.

“The Coast Guard supports TIP because it could make an even larger pool of money available,” he said. “All grant applicants will compete on the basis of the same risk assessment formula.”

Mann added that the specific amount of money allocated to TIP would be up to Congress, if it is enacted.

The Office of Management and Budget said the administration seeks $600 million to fund TIP in fiscal 2007, an increase of $213 million over the 2006 proposal. Projections beyond 2007 are not available, according to an office spokesman.

A number of port authorities support Nagle’s view that port security is underfunded.

“The MTSA had a tremendous impact on the Port of Charleston, with respect to its security infrastructure,” said Byron Miller, director of public relations for the South Carolina port. “In order to meet the requirements, we would have to spend $33.2 million — just in security infrastructure costs — for access control, surveillance systems, lighting and fencing.”

Prior to 9/11, Charleston normally earmarked $2 million per year for security. That doubled to $4 million with the implementation MTSA. Under the Port Security Grant Funding Program, the facility has received a total of $11.5 million in recent grant disbursements.

“To comply with MTSA, we will have to spend another $21.7 million over the next two years to make up for what was not reimbursed under the grant program,” Miller said.

To close that funding gap, he said the Port of Charleston in 2004 “became the first major U.S. port to impose a terminal security surcharge” on all ships entering the facility. The fee is assessed at $1 per linear foot of the vessel for each day it is in port.

“That has generated about $1.5 million,” he said.

The Port of Corpus Christi, Texas, today has annual security costs of $2.2 million, compared to $800,000 annually prior to 9/11. Jerry Cotter, director of operations, said the port has received $15.9 million in Port Security Grant funds, along with $500,000 in state-issued grants. However, its latest request for an additional $22 million in federal grant money was denied.

“This surprised us because the Port of Corpus Christi has been designated by the U.S. Department of Defense as a strategic port — one with a very high value for national defense,” he said. “Corpus Christi, and our neighboring port of Beaumont, have accounted for nearly 60 percent of military goods exported to Iraq.”

After the federal denial, the port placed a number of security related projects on hold, including underwater surveillance, the continued phase-in of a closed circuit television surveillance system, the installation of additional fencing and enhanced security measures for military equipment storage facilities. Also deferred is the implementation of a new “smart card” ID verification system for those with authorized port access. The cards would have embedded biometric information on each card holder.

The Port of Olympia, Wash., though one of the nation’s smaller ports, is an important military equipment transshipment facility, given its proximity to the Army’s Fort Lewis in Tacoma. It has received a $75,000 stipend to offset the $110,000 cost of installing security fencing. The additional $35,000 came from port general funds, said Ed Galligan, port executive director.

Since 2004, he said, the port has contracted for security guard services at a rate of $10,000 per year.

“The guards come onto the property with every vessel port call,” Galligan said. “Olympia averages 25-30 port calls per year, and to defray the cost, we have imposed a $250 daily use charge per ship.”

He worries about the consequences to his port, should the Port Security Grant Program be eliminated.

“It would put us at a severe competitive disadvantage because we’d have to raise our port fees, which would drive business away. Money we would spend for infrastructure improvements would go for security, which would also hurt us,” Galligan said.

Given the demands on the federal budget, specifically the Iraq war and post-Hurricane Katrina recovery, Galligan said he is very concerned about available funds for adequate port security.

But adequate port security funding may depend even more on a total change of mindset among lawmakers, if not the public.

“I think that because of the terrorist attacks on Sept. 11, a lot of the attention with security funding went to aviation,” said Nagle. “Ports, on the other hand, are less visible and less understood ... even though what moves through the ports are things that people produce and consume every day. The problem is, freight doesn’t vote.”

According to Cotter, “the problem is that port security in this country has been largely ignored. When you look at the last Port Security Grant program, a lot of the money went to first responders and others who perform a peripheral security role. While they will respond to an incident, we, at the ports, are the ones involved in prevention.”

Editor in Chief Richard C. Barnard and Associate Editor Matt Hilburn contributed to this report.