In 2017 TraPac signed an agreement with the Port of Oakland to enlarge its existing terminal area and extend its lease agreement to 2030. The lease extension required TraPac to invest $27.3M in equipment, including spending approximately $5M to raise the lift height of two port-owned STS cranes. For unknown reasons, TraPac did not raise the cranes, but received an “investment reduction” on its rent for the value of the work. This became a “point of discussion” between the Port and Oakland and TraPac, along with another dispute over the cost of work to replace a sewer line at the terminal.

TraPac no longer wants to raise the two existing cranes, preferring to purchase new units when required. Under a new agreement, TraPac’s obligation to raise the two cranes will be removed, and TraPac will return the associated portion of the investment deduction it has received so far through an increase in its annual rent. 

Instead of raising the cranes, TraPac is required to retrofit three existing RTGs to a diesel hybrid drive, with which the Port of Oakland has had successful experience at Oakland International Terminal operated by SSA. This will cost an estimated $2.7M and the port will contribute $945,000. TraPac has obtained grant funding of $850,000, so its cost is an estimated $904,500.

TraPac is also required to purchase four new hybrid RTGs at an estimated cost of $12m, to which the port is not contributing, and install new reefer container racking with 530 reefer plugs. The reefer system will cost $3.5M and the port is contributing $1.05M. 

When the net impact of the extra revenue from the return of the investment reduction minus its spending on the RTGs and reefer racks is tallied, the port faces a revenue reduction of between $200,000 to $700,000 per year over the term of the lease. The extra rent TraPac is required to pay for reimbursing the portion of the investment deduction it received for crane work that was not completed amounts to $789,000 per year over the same period.

The new deal highlights Oakland’s commitment to emissions reduction. The port noted that this new agreement “is the first time a terminal operator has been called upon in a Port of Oakland lease agreement to upgrade cargo handling equipment to significantly reduce emissions.” Hybrid RTGs are not zero emissions equipment, but the port said they “will cut diesel emissions by 95%.” This figure is much higher than the emissions reductions some equipment OEMs cite from hybrid drives, but is supported by a 96% reduction in GHG emissions achieved by Oakland International Terminal retrofitting battery hybrid drives from Mi-Jack to 13 RTGs.

“This landmark lease agreement will bring the port closer to its goal of achieving zero emissions operations,” said Port Executive Director Danny Wan. “We have multiple projects underway that are modernising the seaport and building the Port of Oakland into a hub of zero emissions innovations.”