HD2 - Inland Port Study: Feasibility Analysis of Locating an Inland Port in the Commonwealth (2022 Appropriation Act, Item 125.Q.)

Executive Summary:

Item 125 Q of Chapter 2 of the 2022 Acts of Assembly, Special Session I (the 2022-24 Biennial Budget) directed the Virginia Economic Development Partnership (VEDP) and the Virginia Port Authority (Port of Virginia) to assess the feasibility of locating an inland port in the Central Virginia Planning District (formerly known as Region 2000), the Mount Rogers Planning District, and the City of Bristol (which falls within the Mount Rogers Planning District). From August through October 2022, VEDP and The Port of Virginia contracted with the firm Moffatt & Nichol, a global infrastructure advisory firm with extensive experience in the economics of inland ports and intermodal freight, to conduct the feasibility assessment. This study is prepared by VEDP and The Port of Virginia but relies heavily on analyses, insights, and recommendations provided by Moffatt & Nichol, consisting of both public data and data that is confidential due to its competitive nature. Moffatt & Nichol conducted a confidential analysis that included company interviews and a sites analysis for each region.

The study team also held community meetings in the three study areas to engage stakeholders on the assets, challenges, and opportunities within each region for intermodal development. A summary of findings from the assessment is described below. The detailed report that follows explores each of these items in greater detail.

By definition, an inland port is an intermodal facility for the transfer of containers from truck to rail and the inverse. An inland port is connected to a maritime port (The Port of Virginia, in this instance) and is dedicated to supporting and growing import/export freight. It can be a regional driver of economic growth by attracting businesses that require intermodal rail movement to a region, leveraging the convenience of trucks for the short haul with the competitive economics of rail for the long haul.

According to Moffatt & Nichol, there are two overarching determinants of whether an inland port is feasible: market demand and the availability of a site on which to develop the facility. Not every condition on the market or the physical side must be met exactly, but too many diversions or departures from the requirements would prevent the successful development of an inland port. This report will detail the primary market-driven and physical requirements for a successful inland port, how each region stacks up against those requirements, steps the regions can take to improve their position, and alternative development opportunities.

Moffatt & Nichol individually assessed the Central Virginia Region and the Mount Rogers/Bristol Region on their potential market feasibility. The market feasibility assessment leveraged Freight Analysis Framework (FAF) data, jointly generated by the Federal Highway Administration (FHWA) and the U.S. Bureau of Transportation Statistics (BTS), aligned against U.S. Bureau of Economic Analysis (BEA) population data. In addition to market feasibility, Moffatt & Nichol conducted a manufacturing/industrial-derived demand analysis through confidential interviews to determine the viability of an inland port in each region.

Based on the analysis of both the market feasibility and manufacturing/industrial-derived demand, Moffatt & Nichol determined that, at this time, the Central Virginia region does not currently have the demand to justify the development of an inland port. While this assessment details current demand, this study acknowledges that the region could take steps to attract and grow companies that would increase the freight demand in the region. At this time, the Central Virginia region is best positioned to pursue other rail-centric development opportunities to attract industries dependent on rail and grow freight demand.

The analysis conducted by Moffatt & Nichol determined the Mount Rogers/Bristol region meets enough market-driven and physical conditions to warrant additional assessment. It is also recommended that the Mount Rogers/Bristol region continue to pursue other rail-centric development strategies to grow target industries that would be future users of an inland port facility.

Relevant to both Central Virginia and Mount Rogers, an effort should be undertaken to pursue strategies that will cultivate growth in target industry sectors most attractive to the regions. The top priority for any industry growth strategy is to develop attractive sites ready for immediate investment when the opportunity arises for a company to locate or expand in the region. Such a strategy can be costly and requires that local and regional officials be willing to secure, invest in, and market attractive industrial sites. To be successful, they must be willing to play the long game. Especially for rail-centric industrial development, sites should be identified, protected, and enhanced along the routes of both of Virginia’s Class I rail carriers, CSX and Norfolk Southern (NS). Building a robust rail-and-freight-centric economic engine entails a broader industry view that encompasses intermodal and other non-intermodal market opportunities that, with careful planning and regional collaboration, can yield long-term success and growth in the region. VEDP would be essential in partnering with stakeholders in the regions to pursue target sectors for development and identify project-ready sites for prospects.

If a region decides to pursue an inland port, coordination with The Port of Virginia will be necessary moving forward. The commercial and market nature of an inland port requires that the port drive decisions about additional market assessments. The port is in the best position to consider what market space an inland port could occupy and how an inland port could extend its market reach. Since the inland port would be a Port of Virginia entity, the port would be best able to guide its physical layout. VEDP would be essential in targeting business investment for regional development and identifying sites for projects. VEDP would also be in the best position to determine how to market the availability of an inland port as an additional tool in the economic development strategy of the region and Commonwealth.