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congestion, emission, and safety costs, and also reduced or avoided costs of futureinfrastructure expansion. Section 5-2 reviews available estimates of the RFR for SSSservices. Section 5-3 reviews the avoided external costs of highway congestion, fuel use andemission – per- trip and per-mile – when SSS services are used for moving freight as analternative to trucking. Section 5-4 describes the impacts of SSS in terms of avoided futurecosts of infrastructure expansion.5-2 Estimating Required Freight Rate (RFR) for SSSResearchers at the U.S. Merchant Marine Academy have developed a cost model todetermine the required freight rate (RFR) that the SSS operator must charge to break even.Lombardo and colleagues developed the model based on the prevailing national freight ratesfor moving a standard overland RoRo by truck, and equivalent SSS vessel operating costs formoving a single RoRo ship carrying 80 trailers. Based on the findings of cost model, theRFR for moving a truckload was estimated at about $1.25 per statute miles. The cost modelalso estimated the RFR for SSS and assumed that for SSS to be sustainable the RFR must belower than this standard $1.25 rate per statute mile. 59The model calculated the RFR for SSS as a function of operating speed (allowed to varybetween 5 knots and 40 knots), route lengths (allowed to vary between 200 and 800 nauticalmiles) and minimum cargo volume (assumed at 80 trailers per load.) The model found thatmeeting the minimum volume requirement is often key to sustainable service and that marketshare and profitability usually go together. Lombardo and colleagues concluded that theRFR of $1.25 per statute mile would be economically viable for SSS operations assumingthat a single RoRo would have a minimum load to fill up 80 tractor trailers, with operatingspeed falling in the range of 15-20 knots. They found that RFR curves were extremely flatnear the minima, i.e., the diseconomies of marginally faster operating speeds are notparticularly punishing in terms of imposing additional costs (e.g., fuel cost associated withhigher speeds), concluding that: “The minimum RFR rises more slowly than route length,indicating that the cost advantage of SSS increases on longer routes.” This improvement ineconomy is only limited by the feasible limits of how much freight SSS service could carryhow far. However, due to the geography of the U.S. East, Gulf, and West coasts, the studyfound, SSS services cannot be implemented over routes much longer than 800 nautical miles.Table 11 shows the calculated total RFR rates for end-to-end SSS cargo delivery, RFR pernautical mile, and the optimal operating speed assuming an 80-trailer RoRo vessel.59 Lombardo, Gary A., Robert F. Mulligan, and Change Q. Guan, U.S. Short Sea Shipping: Prospects andOpportunities, U.S. Merchant Marine Academy, prepared for Short Sea Shipping Cooperative (SCOOP),November 1, 2004.ONR SSS Final Report 54
Table 11 – Optimal SSS Speed and RFR rates for different Route LengthsRoute Length(Nautical Mile)End-to-End RFRfor SSSRFR perNautical MileOptimalOperating Speed200 256 1.3 18250 286 1.14 18300 307 1.02 18350 327 0.94 19400 348 0.87 19450 368 0.82 19500 388 0.78 19550 409 0.74 19600 429 0.72 19650 450 0.69 20700 470 0.67 20750 490 0.65 20800 510 0.64 20Lombardo, Gary A., Robert F. Mulligan, and Change Q. Guan, U.S. Short Sea Shipping: Prospects andOpportunities, U.S. Merchant Marine Academy, prepared for Short Sea Shipping Cooperative (COOP),November 1, 2004.(Note: 1 nautical mile=1.15 statue mile; 1 statute mile = 0.868 nautical mile.)The Lombardo research team concluded:• RoRo vessels offer the best prospects for serving truck competitive SSS markets as theyhave faster port turnaround times and have traditionally attracted higher-value freightpaying higher prices for service;• Overcoming low freight volumes that would allow carriers to achieve scale economiesand deep-seated expectation of unreliable service may be difficult and may detract fromopportunities to gain market share;• Vessel construction costs can be lowered once economies of scale are achieved;• RoRo cost savings can be significant if they avoid terminal handling costs (which mayincrease the RFR by as much as 20%);• The key shortcoming of the RoRo concept is that a hefty 30% of the weight and volumecapacity has to be devoted to carrying the tractor-trailer cabs; even containerize tractortrailers (on chassis) can never be packed as densely as on a containership.• RFR per nautical mile compares roughly with the cost per statute miles charged bytruckers. SSS should not see to undercut interstate trucking or railroads beyond theminimum amount necessary to assure full capacity on each SSS trip. SSS should thentake advantage of their significantly lower costs to operate at a higher profit margin.• For SSS operations to be successful, strategic alliances with truck and rail carriers areessential.ONR SSS Final Report 55
Page 1 and 2:
Appendix GAssessment of Short-Sea S
Page 3 and 4: 6-1-2 Harbor Maintenance Tax (HMT)
Page 5 and 6: PrefaceThis report has been prepare
Page 7 and 8: Section 1.0 Short Sea Shipping in t
Page 9 and 10: 1-2 Waterway Infrastructure and Fac
Page 11 and 12: grown twofold (from 1.3 billion ton
Page 13 and 14: Figure 3 - Trends in Domestic Water
Page 15 and 16: The SSS/Marine Highway services ide
Page 17 and 18: Table 2 (Continued)Current SSS Corr
Page 19 and 20: Figure 8 - Gulf Coast and America's
Page 21 and 22: 2-2 Current SSS Markets and Carrier
Page 23 and 24: The above list of COB carriers does
Page 25 and 26: Alaska North Slope. The ATBs’ car
Page 27 and 28: Figure 16 - LoLo Barge at Pier, Osp
Page 29 and 30: Between 1994 and 1999 Matson ran a
Page 31 and 32: Figure 18 - Envisioned West Coast S
Page 33 and 34: 3-2 Requirements for Viable SSS Ser
Page 35 and 36: 37Lack of volume commitment in a co
Page 37 and 38: volumes, density and direction, mar
Page 39 and 40: economies within the corridor are t
Page 41 and 42: Section 4.0 Vessels and their Relat
Page 43 and 44: percent of U.S. consumption of petr
Page 45 and 46: 7. Liberty Global Logistics (1 RO/R
Page 47 and 48: Figure 22 - Austal JHSVSource: Aust
Page 49 and 50: Figure 24 - Hopper Barge Loaded wit
Page 51 and 52: hull structure of the tug. The end
Page 53: Section 5.0 SSS Costs: Direct Const
Page 57 and 58: pollution, accidents, highway conge
Page 59 and 60: Table 14 - Fuel Usage and Emission
Page 61 and 62: 5-4 Estimating Reduced Costs of Mee
Page 63 and 64: are based on different assumptions
Page 65 and 66: often need to be conducted in tande
Page 67 and 68: development of markets for construc
Page 69 and 70: 6-1-3 Challenges Arising from the F
Page 71 and 72: hour could deliver the same contain
Page 73 and 74: Conventional subsidy programs that
Page 75 and 76: embarking on its second funding ini
Page 77 and 78: and max weight. The system produces
Page 79 and 80: LoLoMARADMTSNCHRPNPWIONROPAOSGOSVPA
Page 81: New Jersey Department of Transporta
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