Legislative report urges caution on offshore wind port investments

(Updated, April 29 at 9:30 a.m.)

PROVIDENCE – Rhode Island should tread lightly when it comes to investing in land-based operations for the offshore wind industry, a report commissioned by the General Assembly said.

Released on Thursday, the report studies potential growth areas for the Ocean State’s ports, including the Port of Davisville at Quonset Business Park and the Port of Providence. The legislature’s special commission studying ports requested the study, which was conducted by Martin Associates, a specialized consulting firm.

State economic officials have touted Quonset as the future hub of an offshore wind farm industry anchored by Deepwater Wind, which wants to build two wind farms off of Rhode Island shores.

Martin Associates cautioned that the industry remains in its infancy and the future of Deepwater’s proposed farms – one tied up in court – are uncertain.

“The wind power market is uncertain, and investment in wind energy support and facilities should be placed on the private sector, not the state,” the consultants wrote.

The report also says that Deepwater and Davisville port officials differ on whether dredging would be required to accommodate the developer who has agreed to lease 117 acres in the park.

(Spokespeople for Deepwater Wind and Quonset later said there was no disagreement and the water was deep enough. In an interview, Martin could not explain why the report cited a disagreement.)

With the wind business facing uncertainties, Martin Associates points to other potential opportunities.

There is a potential for Rhode Island ports to attract companies that ship perishable fruit thanks to a growing industry and the Ocean State’s close proximity to distribution centers in New England. In addition, Seafreeze already owns dock freezer space at Davisville to store seafood.

But it will take aggressive marketing to tap into the market and more than $2 million to build chilling operations.

Acting as a stop on a marine highway system also shows potential. The consultants said that the East Coast stands to benefit when the Panama Canal is widened in 2014. Traffic has also been picking up through the Suez Canal.

“With aggressive marketing, there may be the potential to develop a barge feeder operation between New York and Providence,” the report says.

Such a feeder operation could deliver 115 direct and indirect jobs to the state and generate $7.2 million in business revenue and $1 million in state and local taxes.

The fruit import business would deliver 122 jobs, $6.5 million in business revenue and $1 million in taxes.

A wind importing business would create 334 jobs, $34.2 million in business revenue and $2.6 million in taxes, all excluding manufacturing operations.

The best bet, Martin Associates said, is to stick with encouraging Davisville’s booming auto-import business. Growing the number of imported cars by 100,000 would create 435 jobs, $79.1 million in business revenue and $3.5 million in taxes. Last year, the port imported 135,575 vehicles from abroad and ranked No. 8 in North America.

The report cautions, however, that water depth at Davisville “could become an issue” for auto importers. However, if the state asks the federal government to pay for dredging, the port would need to charge the federal Harbor Maintenance Tax for the first time, eroding a “key competitive advantage.” The lack of a tax equates to a savings of $12.50 per $10,000 of cargo value.

“It is essential to remain free of the Harbor Maintenance Tax, and focus should also be on higher value autos to maximize the absence of the Harbor Maintenance Tax,” the report said.

Alternatives to seeking federal money include having the state pay for dredging, floating state or local bonds or seeking private investment.