Construction delays at Panama Canal could affect Savannah harbor project

By David Pendered

The $266 million that Georgia is setting aside for the planned deepening of the Savannah harbor is being protected by a proposed financial bailout of the Panama Canal expansion project.

Cost overruns for the expansion of the Panama Canal have contributed to a work stoppage and now a work slow down, including this job site at Cocoli, near Panama City, on Feb. 21. Credit: Rodrigo Arangua, AFP

Cost overruns for the expansion of the Panama Canal have contributed to a work stoppage and now a work slow down, including this job site at Cocoli, near Panama City, on Feb. 21. Credit: Rodrigo Arangua, AFP

The Savannah project is based on the premise that Savannah needs a deeper harbor to handle the bigger ships expected to transit the bigger Panama Canal. However, work on the canal resumed just last week – and only on a limited basis – after a two-week stoppage because of disagreement over $1.6 billion in cost overruns.

The entire budget for the canal’s expansion is $5.25 billion. The total cost now is forecast at nearly $7 billion, which is an increase of more than 30 percent above original projections.

The Panama Canal Authority and a Spanish-led joint venture have agreed to terms to resume a limited amount of work on the canal, according to

The tentative deal was announced Feb. 27. The agreement has yet to be signed and awaits a process of international arbitration before final terms can be reached.

Here in the U.S., hopes are high that the bigger canal will increase global trade, and the resulting economic development. Shipping interests along the gulf and east coasts have great hopes for the project.

For example, the booming LNG market is watching the canal project closely. The canal now is too small to handle the ships that transport liquefied natural gas from the U.S. gulf coast to Asia. The bigger canal will offer a more efficient shipping route, according to a report cited in

The Panama Canal is about 3,500 miles south of Savannah. Credit:

The Panama Canal is about 3,500 miles south of Savannah. Credit:

All these events have become the topic of routine conversation in metro Atlanta., where local officials seem to view the Savannah port as an annex of this region’s warehouse/distribution centers.

In November, Atlanta Mayor Kasim Reed joined a trade delegation to Panama that was headed by Vice President Joe Biden. Sen. Johnny Isakson also made the trip to meet with Panama President Ricardo Martelli.

In 2012, the CEO of the Panama Canal Authority told an audience in Atlanta of the need for the U.S. to modernize its freight handling system. CEO Alberto Aleman Zubieta said the real question in the U.S. isn’t whether to deepen harbors to be able to serve post-Panamax ships – he said all should be deepened. Zubieta said the real question is whether the ports will have the rail and highway systems needed to accommodate the increased freight.

Meanwhile, in Georgia, state lawmakers are expected to approve within weeks the $35 million funding request Gov. Nathan Deal included for the Savannah harbor deepening project. The proposed allocation is in the state budget for the fiscal year beginning July 1.

This $35 million appropriation would bring Georgia’s total funding commitment to the project to $266 million. This sum represents 40 percent of the project’s cost. The federal government is expected to provide the remaining amount.

Supporters of the Savannah deepening project often talk as if construction could begin almost any day. Some top backers have suggested that work begin with just the Georgia portion of funding committed to the project. Others suggest the federal government could commit to its share of funding no later than April 1, as part of a broader federal spending bill.

All the plans to expand Savannah’s capacity are premised upon a wider Panama Canal, a construction projects that’s outside the hands of the even the federal government, and more than 3,500 miles south of Savannah.

However, doubt has circled the capacity of the Spanish-led consortium to finish the canal project on time and on budget, ever since the contract was awarded in 2009, according to

The winning bid was $1 billion lower than the closest competitor, Reuters reported.

The canal’s clock is ticking toward zero hour.

The 12 massive lock gates now in Italy are due to arrive at the canal in December. A significant amount of preparation remains to be completed before the docks can be installed. Then, presumably, the locks must be tested before they are opened for business by December 2015.

Terms of the proposed bailout call for:

  • $100 million from the Panama Canal Authority;
  • $100 million from the Spanish-led consortium, GUPC;
  • Agreement by the PCA to extend payment deadlines to GUPC on advanced payments totaling $784 million.

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

7 replies
  1. Guest says:  >
    Posted: 12:28 pm Tuesday, March 4th, 2014

    Dear Mr. Biden: What’s bigger than hell or high water? Port funding hits White House wall


    By Jim Galloway, Greg Bluestein and Daniel Malloy

    President Joe Biden in Savannah last year, expressing his commitment to
    the Port of Savannah dredging, with (left to right) U.S. Transportation
    Secretary Anthony Scott, and U.S. Sens. Saxby Chambliss and Johnny
    Isakson. AJC file
    Above is the key question for Vice President Joe Biden as he raises money for Michelle Nunn in Atlanta today.
    Last year, on a trip to Savannah, the vice president
    about federal funding for the $600 million-plus deepening of the Port
    of Savannah – which Republicans and Democrats, including Nunn, have
    identified as the top economic priority in the state.
    Here’s what he said:

    “We are going to get this done, as my grandfather would say, come hell or high water.”
    Well, something more powerful than hell or high water has apparently
    come up. President Barack Obama’s proposed federal budget, released
    today, slams the brakes on federal funding for the Port. It includes $1
    million and change for further study. A pittance.
    A reason why Obama’s budget is even more important in this election cycle:
    and supporting a workaround could be dangerous territory for the three
    House members running for Senate, notably Savannah’s Jack Kingston.
    Statements from U.S. Sens. Saxby Chambliss and Johnny Isakson are
    forthcoming. Interestingly, Atlanta Mayor Kasim Reed – a champion of the
    Port dredging who last year – is not with Biden today, his office said.Report

  2. writes_of_weigh says:

    Mr. Guest………..if we are to believe your post, might one assume that our nation has a new transportation secretary? I recall an Anthony Foxx being approved by the U.S. Senate, and sworn to office. I wonder what Secretary Scott’s “position” on Atlanta’s transport gridlock might posit?Report

  3. Guest says:

    Budget surprise angers Savannah port backers 
    [email protected]

    The Atlanta Journal-Constitution

    Obama administration snubbed the Port of Savannah on Tuesday in its
    annual budget request, signaling a delay for the groundbreaking of the
    state’s top economic development priority and drawing the ire of
    political leaders.
    This story continues on our new premium website for subscribers,

  4. Guest says:

    Mar 4, 2014, 4:11pm EST Updated: Mar 4, 2014, 5:28pm EST
    Federal budget ignores Savannah Harbor project Writer- Atlanta Business Chronicle

    There’s no construction money for the Savannah Harbor deepening in the federal budget President released Tuesday, prompting Georgia’s two senators to charge the White House with failing to keep its promises.
    During a tour of the Port of Savannah last September, Vice President called for expediting port improvements at Savannah and other U.S. ports along the Atlantic coast “come hell or high water.”
    But when the fiscal 2015 budget plan came out Tuesday, all it
    contained for the $652 million project was $1 million for further study.
    “We are deeply disappointed and frustrated,” Republican U.S. Sens. and,”
    wrote in a joint statement. “It is baffling to see this administration
    choose to ignore a statute passed just six weeks ago that cleared all
    remaining obstructions to moving forward with the project.
    “This administration has promised to deliver economic development and
    economic opportunity to the state of Georgia. … It is now clear they
    would rather pay lip service to Georgians than to deliver on their
    An omnibus spending bill Congress passed in January included language
    reclassifying the deepening of Savannah Harbor from 42 feet to 47 feet
    from a “planning” project to a “construction” project.
    At the time, members of Georgia’s congressional delegation said the
    provision represented the last potential hurdle to the delivery of the
    first significant federal funding toward the project.
    “The administration’s position … is that they will ignore the clear
    guidance from Congress and will instead request more funding for
    studies,” Chambliss and Isakson wrote. “We call on the administration to
    allow this project to move forward and to get out of the way of the
    people of Georgia. We are tired of waiting.”Report

  5. Guest says:

    (Page 2 of 2),
    executive director of the Georgia Ports Authority, noted that the state
    has fully funded its share of the project, about $265 million. He said
    that will allow work to begin on the project soon, even without the
    federal money.
    “Under the federal law recently passed, we will begin dredging using
    state funds until the federal government lives up to its obligations in
    this partnership,” Gov
    said. “The Obama administration has noted repeatedly the importance of
    projects such as this for economic development and job creation, and the
    state of Georgia, as always, stands ready to do its part.”
    The port project is due to be completed by mid-2017, two years after
    the planned widening of the Panama Canal. The deepening is critical if
    the Port of Savannah is to accommodate the larger containerized-cargo
    vessels that will be using the canal.Report


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