Environmentalists Pledging to Halt Dredging

A recently filed lawsuit could yield a landmark decision affecting U.S supply chains and potentially deflating the promise of the Panama Canal Expansion.

The Panama Canal expansion project, which is scheduled to be completed in 2014, will significantly impact maritime commerce, global trade routes and North American supply chains. Upon completion, the Panama Canal will be able to accommodate massive Post-Panamax containerships, thereby increasing efficiency, capacity and trade flow.

Accordingly, many North American port authorities, with the help of federal and state agencies, will dredge their shipping channels and adapt their shore infrastructure to accommodate Post-Panamax containerships. However, a recent legal challenge to port expansion may prevent the U.S. Army Corps of Engineers (USACE) from dredging the Savannah River, which, in turn, would preclude the Port of Savannah from being able to accommodate Post-Panamax containerships.

Depending on the outcome of this case, styled “Savannah Riverkeeper et al. v. United States Army Corps of Engineers et al.,” similar legal challenges will likely be filed in federal and state courts across the East and West Coast port corridors that may delay or prevent federal and state agencies from dredging and deepening river channels.

As stated in “Savannah Riverkeeper,” the USACE began planning a civil works project to deepen the Savannah River so that the Port of Savannah can accommodate Post-Panamax containerships arriving from the Panama Canal. Several South Carolina and Georgia-based environmental conservation groups filed a complaint in South Carolina state court seeking to stop the deepening project on the grounds that deepening the Savannah River will violate South Carolina pollution control laws, degrade water quality, destroy marshlands and cause the discharge of toxic cadmium-laden materials.

Attorneys for the environmental conservation groups further argue that state law requires the USACE to obtain a pollution control permit before beginning the deepening project.

To provide the defendants with a forum free from the influence of local interests and prejudice, the United States Attorney for the District of South Carolina removed the case from state to federal court pursuant to a federal statute, 28 U.S.C. § 1442(a)(1), which provides for removal of a civil action against any agency of the United States.

After the case was removed to federal court, the attorneys representing the USACE filed a motion to dismiss the complaint for lack of subject-matter jurisdiction. In their motion, the attorneys for the USACE argue that the plaintiffs’ claims are not fit for judicial review because such claims regarding environmental damage are purely speculative and, further, that the court should dismiss the complaint because the plaintiffs lack the standing to sue the USACE given that the plaintiffs have not suffered any actual harm.

Ultimately, U.S. District Court Judge Richard Gergel will decide whether the USACE will be able to continue working on the deepening project or whether it must stop all work on the project until it obtains pollution permits and complies with applicable pollution control laws, some of which could make the deepening project almost infeasible.

As every actor along the supply chain prepares for the impact of the Panama Canal expansion project, the “Savannah Riverkeeper” lawsuit poses an unexpected variable that could adversely affect the ability of ports to dredge their shipping channels. This, in turn, would adversely impact maritime shipping companies, railways, drayage and other logistics professionals who were otherwise prepared to profit from tremendous increases in cargo volume brought by Post-Panamax containerships.

What started out as an argument among parties in a small, southern town could have a ripple effect that would create a firestorm within the U.S. shipping industry and the U.S. economy as a whole if Post-Panamax ships cannot dock at a majority of U.S. ports.

Enan Stillman is an associate with the law firm of Nelson Mullins Riley & Scarborough (www.nelsonmullins.com). He practices in the areas of transportation and logistics, mergers and acquisitions, debt and equity financing, fund formation and investment management, land use and general corporate law and governance.

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