Federal judge vacates permits for $635 million Delaware port terminal

Winter is coming. But the war over Delaware River shipping is only just heating up.

A proposed new $635 million Edgemoor container terminal near Wilmington has hit a major setback this week, after a federal judge on Monday vacated multiple important federal permits that would allow the new terminal to be built.

When completed, the Edgemoor terminal would be the “largest shipping terminal in Delaware since the current Port of Wilmington opened in 1923,” according to state officials – a “green port” that state officials say will quadruple the Wilmington port’s capacity for container cargo, and allow service to the new class of bigger container ships being sent through the world’s ports.

But this week’s ruling in the US District Court will likely throw a large wrench into Delaware’s construction plans, setting back a long-planned project that state officials have called the most important new infrastructure project in Delaware since Route 1.

For years, the Port of Philadelphia (PhilaPort) and its operators have raised a series of legal, regulatory and political challenges to block the proposed Edgemoor container terminal near Wilmington, arguing that the new Delaware River terminal would siphon business away from Philadelphia terminals and hinder ship traffic upriver.

Most of those challenges have run aground, largely clearing the way for the Edgemoor project. But the US District Court ruling Monday revokes multiple important federal permits, after a lawsuit filed against the US Army Corps of Engineers by operators at the Port of Philadelphia and the Gloucester Marine Terminal in New Jersey.

Officials and attorneys for PhilaPort hailed the judge’s decision as a move in the right direction. Delaware officials are less sanguine.

“This decision is another example of the ports in Philadelphia trying to stop Delaware from building a new facility at Edgemoor to expand our maritime economy and create jobs for Delaware families,” wrote Eugene Bailey, executive director of the quasi-public Diamond State Port Corp., which owns the Port of Wilmington.

“While we were not part of the lawsuit, we will work with the Corps to address any concerns so that we can move forward as quickly as possible,” he wrote.

Here’s what we know.

Why did a federal judge vacate permits for the Edgemoor terminal?

In short, US District Judge Mark Kearney ruled that Army Corps officials did not follow their own rules when approving permits for the Edgemoor project.

Attorneys for the Philadelphia ports had argued that the Army Corps did not conduct full due diligence in assessing Philadelphia port operators’ objections to the Port of Wilmington’s plans and did not adequately assess safety and navigation concerns.

Port operators’ attorneys also said the Army Corps failed to consider the economic effects on PhilaPort, which contributed millions of dollars to the Delaware River Main Channel Deepening Project that smoothed the way for large container ship traffic by dredging the depth of the river five feet deeper, from 40 to 45 feet.

The lawsuit alleged that Delaware’s proposed new port was not “primarily intended to attract new business to the Delaware River but rather to siphon existing business from up-river ports in the Philadelphia area.”

Kearney was sympathetic to this economic argument, but only to a degree.

“The Philadelphia Port Authority might feel it is unfair to be subjected to competition from a neighboring port benefitting from the public work the Philadelphia Port Authority agreed to fund,” Kearney wrote. But that’s not really the federal government’s problem, he argued.

What is a problem, Kearney wrote, is that the US Army Corps “arbitrarily and capriciously departed from its own procedures” when it didn’t require Diamond State Port Corporation to gain a “Statement of No Objection” from PhilaPort, the river deepening project’s only non-federal sponsor.

Kearney also ruled that the Army Corps “did not engage in reasoned decision making” when considering the effects on safety and river navigation posed by Edgemoor’s creation of a basin to allow large ships to turn around and change direction at the ports.

Accordingly, Judge Kearney revoked multiple Army Corps approvals of Diamond State’s plans at Edgemoor, and remanded the plans for re-evaluation.

What does the decision mean for the future of the Edgemoor container terminal?

Advocates for the Philadelphia port have hailed the decision.

The decision is “a significant result for the Philadelphia Regional Port Authority (PhilaPort),” Andrew Levine, a partner at law firm Stradley Ronon who led PhilaPort’s legal effort against the Edgemoor plans. “We were pleased that the judge broadly agreed with our positions, vacating various underlying permits, resulting in the US Army Corps of Engineers reevaluating the project.”

Levine called the decision “a huge first step.”

“There’s a process, and in this instance, that process wasn’t followed,” wrote spokespeople for the Port of Philadelphia. “As the Non-Federal sponsor of the Delaware River Main Channel deepening project, PhilaPort is encouraged by the court’s ruling to ensure that the process is adhered to now and in the future.”

Delaware officials stress that the container port will continue to move forward, despite the wrinkle.

“This is a setback, but only that,” wrote Delaware Secretary of State Jeffrey Bullock. “There is overwhelming support for this project in Delaware.”

Bullock said the state can’t comment on litigation – even litigation to which the state is not a party – but that Delaware will “work with the US Army Corps to fix any problems so we can get the permits reinstated as quickly as possible and keep this project moving forward.”

Army Corps spokespeople declined to comment in the wake of the decision. The Army Corps is able to appeal the ruling.

The legal setback for Edgemoor comes amid a raft of good financial tidings for the project, as the Port of Wilmington announced $127 million in federal money this week toward eco-friendly cargo handling equipment, to be split between the existing port terminal and the proposed Edgemoor terminal.

In May, the State of Delaware pledged $195 million toward the terminal, bringing the state’s total investment to around $250 million. Port operator Enstructure has agreed to pay more than $300 million toward the container terminal’s construction.

State officials argue that the Edgemoor terminal would create nearly 6,000 new jobs if it moves forward, including 3,100 direct jobs, bringing in $39 million annually in state and local taxes.

Matthew Korfhage is a business and development reporter in the Delaware region covering all things related to land and money: openings and closings, construction, and the many corporations that call the First State home. Send tips and insults to [email protected].