Duluth City Council asked to approve $3 million port project

People had expected traffic at Duluth's new shipping container terminal to grow, but not as fast as it actually has, said Kevin Beardsley, chief financial officer for the Duluth Seaway Port Authority.

The facility, which shuttles large steel shipping containers back and forth between trucks and trains, opened in late March of 2017, and it's already in need of more capacity. Beardsley said he anticipated the terminal likely would need to expand in a couple more years. However, shippers have shown such intense interest in using the facility, located on the Clure Marine Terminal, that the timeline has been accelerated.

"We're off to a great start," said Jonathan Lamb, president of Lake Superior Warehousing Co., a business that joined forces with the port authority to form Cargo Connect, the entity running the container terminal.

The project will increase the facility's rail capacity by about 85 percent through extending two existing rail lines by about 1,300 feet each.

The paved laydown area for the facility will be enlarged by 4-plus acres - more than doubling the surface area of the existing yard. The expansion will make it possible to stage more containers at the facility, while also providing plenty of room to maneuver the reach stackers that are used to move and load the big metal boxes.

"We see this as a long-term play in that we are going to have continued steady growth, and it's going to be growing over multiple years. We see that much opportunity and that much possibility," Lamb said.

Deb DeLuca, executive director of the Duluth Seaway Port Authority said some customers have been able to cut their freight costs by as much as one-third, since products can be stored in warehouses and packed into containers locally instead of being moved to Twin Cities or Chicago hubs for transport.

"We have access to four class-one railroads, which is unique for a port. A lot of ports consider themselves lucky if they have access to two," DeLuca said. "And what that does is give you competitive rail rates."

Access to relatively uncongested highways also helps, DuLuca said.

Lamb said the terminal has proven popular with Northland businesses and shippers from throughout the Upper Midwest

"The intermodal terminal here has served a wide swath so far. It's done everything from the construction side and raw materials to finished manufactured goods to agricultural products for export markets," he said.

Pushing ahead

The low bid for the project came in at north of $2.97 million. That winning bid from Northland Constructors of Duluth Inc., exceeded the port authority's original estimate by more than 25 percent.

As a result, the authority plans to dig $610,000 deeper into its own pockets, providing a total local match of more than $1 million.

First, however, the Duluth City Council will need to approve the contract. Although no city funds are involved, Duluth has agreed to serve as the fiscal agent for the terminal project. A resolution awarding the contract is expected go to a council vote Monday night.

If it passes, Beardsley said some of the work on the rail lines could begin yet this year. But he expects the vast majority of the work will occur between spring and late summer of 2019. Beardsley said the temporary post-fire closure of the Husky Energy refinery in Superior could complicate the project, as bituminous paving materials will be in shorter supply while it remains offline.

If not for the investment, Lamb said the terminal soon could run the risk of having to turn away business.

"You always want to meet your customers' needs. So our goal is to stay ahead of the curve on the capital investments here and make sure we are adding enough capacity so we can really see this terminal grow and expand," he said.

Beardsley, too, stressed the importance expanding the terminal in a timely fashion.

"In order for us to continue to grow, we need this capacity, even though the cost came in higher than we expected," he said, noting that a grant from the Minnesota Department of Transportation will ease the local burden.

At present the shipping containers handled at the Duluth terminal all move by land, via rail or truck. But the future eventually may include a marine component, said Lamb, noting that prospect is probably at least a decade in the distance.

"Part of our challenge with the seaway is obviously that the system remains closed three months out of the year. So from the standpoint of consistency and maintaining the steady flow of traffic that can make it hard for shippers who want to ship year-round," he said.

But as the nation's roads and rails continue to grow more congested, Lamb said he could see a day when more container traffic is drawn into the Great Lakes, and the shipping season on the St. Lawrence Seaway is extended, even if it means fighting the ice.

Staff writer Jimmy Lovrien contributed to this story.