Posted on December 7, 2022
Lee Cranford stood on a grassy rise behind his office at the Virginia Inland Port and pivoted slowly, pointing into the near distance toward one massive building after another.
Interbake. Sysco. Ferguson. Nature’s Touch. Toray. Axalta. Family Dollar. The companies trade in products as varied as frozen foods and plumbing supplies, but all rely on overseas markets – and all have found a perhaps unlikely international hub in rural Warren County.
The Virginia Inland Port opened near Front Royal more than 30 years ago and commerce has followed, as manufacturers and distributors have sought inland access to one of the largest ports on the East Coast: the deep-water harbor at Norfolk, with its steady stream of ocean-going cargo ships.
Trains carry cargo the 220 miles between the coast and the inland port, allowing customers to build warehousing and production facilities on less expensive land and reduce their reliance on trucks, while at the same time easing congestion at the busy Hampton Roads marine port.
Cranford, who grew up in the Shenandoah Valley and moved back several years ago to manage the inland port, figures that 90% of the companies that use the port are within a 30-mile radius. “We have a personal relationship with our customers,” he said. “They’re our next-door neighbors.”
The Virginia Port Authority, which built and operates the Front Royal terminal, estimates that it has brought more than 8,500 jobs and more than $950 million into the region over the last three decades, and it counts 46 “major companies” in the area as port users.
That success has led to several attempts over the years to launch another inland port in Virginia. None has succeeded, but another effort is now brewing: The General Assembly set aside $200,000 in the current state budget to study the feasibility of opening an inland port near either Lynchburg or Bristol. The study, which was due by Nov. 1, has been delayed but should be delivered any day, according to a spokeswoman for the Virginia Economic Development Partnership.
State Sen. Steve Newman, R-Bedford County, introduced the budget amendment that funded the study. Through his staff, he declined to discuss the inland port issue until the report is complete.
Inland port brings a transportation hub and an economic engine
People who visit the Virginia Inland Port for the first time tend to be underwhelmed, Cranford said.
It’s called a port, but there’s no big water on the horizon, no giant robots moving containers around, no hulking cargo ships or tugboats.
“But the beauty really is in the simplicity,” said Cranford, who worked at the Norfolk port for several years before taking the job in Warren County.
Six days a week, Norfolk Southern trains deliver tons of raw materials and finished goods to the Virginia Inland Port from the deep-water harbor at Norfolk. Monday through Friday, southbound trains pick up containers – some full of agricultural or timber cargo, some empty – for the trip back to the coast.
The Virginia Inland Port employs just 13 people, including Cranford. They load and unload containers from the train to the port’s fleet of chassis and back, keep the cranes and other equipment running, log shipments into the port-wide computer system. A vendor based at the terminal handles maintenance for the chassis and can repair shipping containers.
Customers send their own truck drivers to the inland port for pickups and deliveries. Containers coming off the trains are loaded onto the port’s own fleet of chassis, so drivers don’t have to wait around to be loaded – they just hook up and drive away. That helps keep traffic moving quickly, Cranford said, and was a boon during the pandemic supply chain mess, when a shortage of chassis contributed to delivery delays.
The industry standard for trucker turn-time – how long it takes a driver to get into a facility, get their container and get it out the gate – is about 60 minutes. At the Virginia Inland Port, it’s a fraction of that, he said.
“Here, it’s so low we don’t even have to track it,” he said. “A trucker can bring a box in, get another box and be out the gate in 15 minutes if he hustles.”
Because of that, and because most of the inland port’s customers are so close by, Cranford sees the same 30 or 40 truck drivers over and over. “One of these guys can make 10 runs back and forth to Winchester and be back at home in time for dinner,” he said. That’s a selling point for customers, he said, especially when truck drivers are in short supply.
The Virginia Inland Port, which cost about $10 million to build, is widely considered to be the first of its kind in the U.S. Its original mission when it opened in 1989 was to capture Shenandoah Valley cargo that was going through the Port of Baltimore and divert it to Norfolk.
What actually happened came as a surprise, even to the port authority, said spokesman Joe Harris.
“At the time, it was a competitive move. We didn’t realize it was going to be an economic driver,” he said. “I don’t think we had any idea that was going to happen.”
The Virginia Inland Port in Warren County serves customers from up and down the Shenandoah Valley and beyond. Some of the terminal’s biggest users are in the localities noted above.
When the potential became clear, the port authority started working with Warren County to encourage development around the new inland port. “This has been more than 30 years in the making, and it’s still changing,” Harris said.
Manufacturers and logistics companies began to congregate around the inland port, drawn by the region’s inexpensive land and ready workforce – and the fact that they could take advantage of easy access to a deep-water harbor and to Interstate 81, a key north-south shipping route.
Whoever chose the 161-acre Warren County site was “an absolute genius,” Cranford said. It’s 6 miles from the intersection of interstates 66 and 81, and just a quarter-mile off Norfolk Southern’s 2,500-mile Crescent Corridor, which runs between upstate New York and Memphis or New Orleans.
It’s difficult to come up with an exact measure of the inland port’s economic impact; the investment and jobs are spread across multiple localities, and much of the growth has come from businesses that have sprung up to support the port’s customers. Even the port authority’s numbers – 8,500 jobs and more than $950 million in investments – are just estimates.
But local economic development officials and business leaders say that the inland port has been key to attracting new businesses and helping existing companies grow.
“Has the Virginia Inland Port had a positive impact on the economic viability of that part of the state? It absolutely has,” said Chris Thompson, vice president of business development for InterChange Group, a Harrisonburg-based logistics company that provides warehousing and transportation services.
In the mid-2000s, InterChange bought land adjacent to the inland port and built a facility to serve port customers who needed to move imported cargo onto domestic trailers, or vice versa. While InterChange later ended up leasing the entire building to a customer that doesn’t use the port, the company maintains a fleet of trucks that service other port customers, Thompson said.
“I know when people are looking here, that’s one of the big things they look at – how can they utilize that asset here to their own economic benefit,” Joe Petty, the director of economic development for Warren County, said of the inland port.
“The port is always in the forefront of that discussion as this great amenity and asset that we have,” he said. “Bringing essentially a port system 200-plus miles inland has just been so beneficial to us.”
A recent example: Equus Capital Partners, a Philadelphia-based real estate developer, last year broke ground on a 340,000-square-foot warehouse with 34 loading docks that’s just a half-mile from the inland port. A year later, before the building was even complete, Equus said that a Fortune 500 company had signed a 10-year lease for the entire facility.
The tenant’s name hasn’t been publicly disclosed, so its particular interest in the site is unclear. But the news release announcing the project laid out what Equus saw as the location’s selling points: “Industrial space in close proximity to ports (both ocean ports and inland ports) is very desirable to users who import product from overseas and distribute throughout the U.S.,” it said, and continued: “Real estate taxes and traffic flow in the region are favorable as compared to submarkets located along I-95.”
But the port hasn’t just helped the region attract new businesses, said Jay Langston, executive director of the Shenandoah Valley Partnership, a regional economic development entity. The Shenandoah Valley has a long history of food manufacturing, he said; the inland port gave existing companies new ways to deliver their products and opened up additional markets.
Petty pointed to Nature’s Touch Frozen Foods, which last year said it would invest more than $40 million to expand its existing Warren County operations with a new 126,000-square-foot facility and 67 new jobs.
“It’s not just bringing in new jobs,” he said. “It’s allowing your existing businesses and companies to expand and stay within your area.”
Langston cautioned, though, that even in the Shenandoah Valley – a place “blessed with happenstance” thanks to its location – the development around the inland port didn’t just happen.
“An inland port isn’t going to be successful unless you have the supporting infrastructure,” he said. “An inland port in and of itself isn’t going to do anything. It’s got to be supported and it’s got to be in the proximity of a market that makes sense.”
It’s taken coordinated work on the part of local governments, he said.
“If it’s purely a facility that’s just going to be inbound and outbound containers, well, basically your economic development potential is very minor,” he said. “If you want to use it as an asset, though … you need to know who’s shipping and where are they taking it from, and then plan your infrastructure accordingly for that.”
What kinds of companies use inland ports? he asked. What kind of sites do they prefer? How about infrastructure? What should zoning look like?
“It doesn’t come without a lot of planning, a lot of foresight – thinking where do you want to be 10 years down the road,” Langston said. “It makes it look like this has all happened because of the inland port. Well, a lot of it has, but it’s been 25 years.”
Pandemic shipping woes and a move away from China turn attention to East Coast ports
The shipping landscape has changed dramatically since the Virginia Inland Port opened nearly 33 years ago. Dozens of inland ports of varying designs now handle cargo across the U.S., with more on the way. Close to home, South Carolina and Georgia – both economic development competitors to Virginia – each have multiple inland ports.
Some of these ports have grown up around one or two anchor customers, like Inland Port Greer in South Carolina, which counts the nearby BMW and Michelin plants as anchor customers. Others have been developed to relieve pressure at marine ports, or to serve as economic development boosts, or to take trucks off the road.
The mid-pandemic supply chain crisis made shipping an even more critical issue for anyone doing business with overseas suppliers.
“The general public has become much more aware of shipping and logistics,” said Thompson, of InterChange. “We’ve been invisible for a long time. There’s not been a lot of thought into what happens from where things are made to where things are consumed. But there’s a very complicated and well-developed network that functions there – again, sort of invisibly.”
East Coast ports in particular have seen growing interest from shippers who are increasingly unwilling to rely on West Coast ports after watching container ships stack up for weeks at the ports of Los Angeles and Long Beach.
“COVID taught a lot of people a lot of things,” Harris said. “The East Coast is capturing more of the West Coast’s market share. The cargo owners and shippers and 3PL [third-party logistics companies] – they’ve all realized that the East Coast is very efficient, there’s a lot of good ports over here, and there’s no sense in having all of our eggs in the West Coast basket.”
That dovetails with a growing desire to wean the U.S. from reliance on Chinese imports. As American companies shift away from China and toward other trading partners, East Coast ports are reaping the benefits, said Walter Kemmsies, managing partner at the Savannah, Georgia-based Kemmsies Group, which consults on transportation and logistics projects. Cargo coming from places like India, Vietnam and Indonesia can travel through the Suez Canal to the East Coast, rather than to Los Angeles.
Harris, the port authority spokesman, doesn’t foresee a massive shift of cargo back to the West Coast. But the Port of Virginia and its competitors on the East Coast have to figure out how to hold onto the cargo they’ve picked up over the last couple of years.
That’s where facilities like the Virginia Inland Port and the authority’s James River barge terminal in Richmond come in, he said. “When you have things like inland ports and modern facilities and expansion plans – not just plans, but the money to do it – that sends a real signal that hey, Virginia’s ready,” Harris said. “And we’re going to be ready for years.”
Over the last five years, between 28,500 and 38,500 containers have moved through the inland port annually, according to data from the port authority. So far this year, cargo is down by about 20% compared to last year, Harris said; as of October, the total was 21,923 containers. In 2021, the inland port posted a increase in cargo of almost 10% over the previous year.
(For comparison, last year the Port of Virginia as a whole handled about 2 million containers, up nearly 26% over the previous year.)
“Cargo is always kind of up and down,” Harris said. “COVID was crazy. The nation, the industry is probably heading into a down phase for the next four to six months. But we’re confident it’ll pick back up.”
So confident, in fact, that the port authority is going ahead with a planned $23 million in improvements at the inland port. Just over $15 million will be used to double the amount of track inside the port and to buy rubber-tired gantry cranes that can stack containers five high, to maximize storage space on the site. The remainder of the funds will go toward improving a railroad crossing outside the borders of the port property.
The port authority also is investing more than $1 billion to expand operations at the harbor, Harris said. “The goal is to always be ahead of the future,” he said. “We’re not talking two or three years, we’re talking two or three decades. … If you’re not investing and getting ready for whatever may be next, you get caught flat-footed.”
Should Virginia have a second inland port? If so, where?
This isn’t the first time that legislators and business leaders have explored the idea of opening a second inland port in Virginia.
In 2006, Norfolk Southern pursued an intermodal project at Elliston in Montgomery County. In 2017, state Sen. John Edwards, D-Roanoke, proposed the idea of an inland port in the Roanoke-Blacksburg region. Around the same time, a study was commissioned to look at whether an inland port could be sited in Pittsylvania County.
None of those previous attempts succeeded.
Newman initially sought $100,000 from the state to study the feasibility of an inland port in the Lynchburg area. By the time the state budget was finalized, that figure had been raised to $200,000, and the study area had been expanded to also include the region between Bristol and Wytheville.
According to the request for proposals, provided by the Virginia Department of Economic Development, the study would look at the potential economic impact of an additional port in Virginia, determine what factors would make a project attractive to a rail provider, and identify potential sites. The contract was awarded to Moffatt & Nichol, a consulting firm that specializes in the transportation and port sectors.
The batting average for new inland ports is low, warned Frank Harder, principal at the Tioga Group, a freight transportation and logistics consulting firm.
“Most of the time, when people investigate markets, it turns out to be a negative result,” he said. “You need to be really careful about your commercial market assessment.”
Nor should an inland port be expected to be an overnight success, said Kemmsies, who was on a team that made a bid for the Virginia study. It can take years – even decades – for an inland port to break even.
The first few years were a struggle for the Virginia Inland Port, Harris said. It racked up losses its first few years, according to reporting at the time.
“I’d say it has taken 25 years to mature and there is still a lot of growing to be done,” Harris said.
As inland ports have increased in popularity, there have been failures.
The $32 million Heartland Intermodal Gateway opened near Huntington, West Virginia, in 2015 but was shuttered just a few years later; state officials said at the time that the terminal hadn’t been able to meet the cargo volume required by Norfolk Southern.
At one point, West Virginia approached the Virginia Port Authority about running the facility, Harris said, but it didn’t make financial sense. It went up for auction in 2020 but didn’t sell. This summer, the state transferred ownership of the terminal to the Wayne County Commission; its future has not been determined.
Railroads play a key role in the success of inland ports, and they generally need a guarantee that a specific route will be viable, Langston said. A railroad isn’t going to set aside cars and an engine unless it knows it’s going to have the volume to make it work, he said.
Railroads will take on shorter runs today than they used to, Kemmsies said, but not without high enough cargo volumes – or, lacking those volumes, a subsidy to cover the shortfall.
An inland port in the Lynchburg region could potentially be served by either Norfolk Southern or CSX. The Bristol area is served by Norfolk Southern.
Neither railroad would comment directly on the General Assembly’s current study, but spokespeople from both companies said inland ports play a role in how they serve customers.
“Generally speaking, inland ports allow us to be more efficient, diversify our supply chain offerings, increase our ability to improve speed-to-market, ease congestion on heavily-traveled roads, and help reduce the US economy’s carbon footprint,” Norfolk Southern spokesman Connor Spielmaker said in an email. “We’re looking forward to the positive role that inland ports will continue to play in our long-term business objectives.”
“For CSX, the creation of inland ports can enable us to connect to global markets that would otherwise be served by trucks,” railroad spokeswoman Cindy Schild said in an email. “The development of inland ports has an added benefit for port authorities and communities by alleviating congestion and reducing emissions from truck traffic at ports.”
Harder believes there’s “probably” room for additional inland ports in the Southeast region. But a careful market study would need to be done to determine, among other factors, where competition would come from, he said: Would a second inland port in Virginia be competing with South Carolina for Charlotte’s cargo traffic? If West Virginia restarts its inland port, where might it draw customers from?
The budget amendment is silent on what happens once the study is complete.
Megan Lucas, CEO of the Lynchburg Regional Business Alliance, said her group and others have been advocating for years for an inland port in their region, and she credited Newman with getting the conversation going at the state level.
She’s eager to proceed, she said, once she knows what comes next.
“What is the path forward?” Lucas asked. “If the feasibility study comes back and says neither location is feasible, or the Lynchburg region is more feasible, what are the next steps? That’s what we’re unclear of, is what happens then. …
“But rest assured, if it comes back and says the Lynchburg region is feasible, we will take that bull by the horns and run with it.”