California Is the Supply Chain’s Weakest Link

Environmental and antibusiness regulations in the deep blue state are backing up port traffic

By Allysia Finley of The WSJ. Excerpts:  

"The backup of container ships at the Long Beach and Los Angeles ports has grown in recent weeks"

"The two Southern California ports handle only about 40% of containers entering the U.S., mostly from Asia. Yet ports in other states seem to be handling the surge better. Gov. Ron DeSantis said last month that Florida’s seaports had open capacity. So what’s the matter with California? State labor and environmental policies."

"One barrier is a law known as AB5. Before its enactment in 2019, tens of thousands of truck drivers worked as independent contractors, which gave them more autonomy and flexibility than if they were employees. As contractors, truck drivers can work for multiple companies, which allows them to nimbly respond to surges in demand.

The International Brotherhood of Teamsters, however, has long wanted to organize truck drivers, including those serving California’s ports. Since the National Labor Relations Act prevents unions from organizing independent contractors, Democrats passed AB5, sponsored by Assemblywoman Lorena Gonzalez, a Teamsters member.

Trucking companies warned that the law could put small carriers out of business and cause drivers to leave the state. They want the U.S. Supreme Court to review a legal challenge to AB5, but many are complying after defeats in lower courts. It’s hard to quantify how much AB5 has contributed to the shortage of truck drivers. But there’s little doubt the law hinders efficiency and productivity.

Another problem: a shortage of storage space. “There is absolutely no available capacity in the warehousing sector due to the difficulty in developing any new capacity,” the businesses noted in their letter. The vacancy rate for warehouses near the Los Angeles and Long Beach ports was a mere 1%, compared with 3.6% nationwide.

If warehouses don’t have space in their facilities or parking lots to unload goods, drivers can’t make deliveries. Some truck drivers are leaving container boxes along with the chassis outside storage facilities and are picking them up later, but that results in a shortage of chassis at the ports. (About half of chassis are leased to truckers from a common pool supplied by private companies.)

Inland California cities, where land is abundant, flat and relatively inexpensive, have had enormous warehouse growth over the past decade amid the boom in e-commerce. The number of inland “big box” distribution centers increased 54% between 2009 and 2020 to 711, according to Statista. Some cities encouraged development because warehouses provide relatively high-paying jobs for less-educated workers, including immigrants.

But in California warehouse growth ignited opposition from environmental groups, which complain of pollution and noise. Many cities have limited new logistics facilities. Colton, in San Bernardino County, has imposed a moratorium on new warehouses and truck facilities through early May 2022.

One trucking company this year withdrew a plan for a 54,000-square-foot warehouse and parking facility for 475 trucks and containers atop a former landfill in Carson amid political opposition. Some cities have limited the hours when trucks can unload containers at stores, which makes it harder to free up warehouse space—another reason Mr. Biden’s 24/7 call has had little effect.

State officials have also pressed localities to attach green mandates to permits for new warehouses, which can be poison pills. Former Attorney General Xavier Becerra issued guidance with a long list of “best practices and mitigation measures” for warehouses to comply with the California Environmental Quality Act. Among them: “prohibiting off-road diesel-powered equipment from being in the ‘on’ position for more than 10 hours per day,” “forbidding idling of heavy equipment for more than two minutes,” “requiring on-site equipment, such as forklifts and yard trucks, to be electric with the necessary electrical charging stations provided,” and “constructing electric truck charging stations proportional to the number of dock doors at the project.”

This July Mr. Becerra’s successor, Rob Bonta, sued the city of Fontana for approving a 205,000-square-foot warehouse with 22 truck docks. Mr. Bonta complained the city didn’t adequately consider strategies to mitigate air pollution, such as requiring low-emission construction equipment and green building standards.

This followed a rule from South Coast Air Quality Management District in May that will require some 3,000 warehouses in Southern California to mitigate truck diesel emissions—for instance, by installing solar panels or employing electric vans and trucks for deliveries. Yet the state Air Resources Board has already mandated squeaky-clean engines for heavy-duty trucks."