New Orleans port is back in business

But the future of a key canal - suspected of funneling the storm surge into the city - is uncertain.

Mark Blanchard built his cold storage plant on the Inner Harbor waterfront, where large, deep-water ships had easy access. He felt confident they would always be able to dock at his plant because it was located not on the Mississippi River itself, but rather near a canal, 36 feet deep, that Congress had specified should be maintained at that depth.

But hurricane Katrina has changed all that.

The canal - part of the Mississippi River Gulf Outlet (MRGO), called Mr. Go by locals - may have acted as a giant funnel, transporting the hurricane's storm surge over the levees and into eastern New Orleans, experts suggest. Now the US Army Corps of Engineers is studying whether to dredge the channel - which is filling in, blocking access to Mr. Blanchard's facility - or to abandon Mr. Go altogether.

Debate over the canal's future is already cooking up a Louisiana gumbo of money and politics.

The Port of New Orleans is asking that the state or federal government spend $360 million to move Blanchard's operation and eight other companies to the banks of the Mississippi River. If not that, then the port wants the government to pay some $600 million to enlarge the locks that currently connect the Mississippi to another canal that serves the Inner Harbor, allowing ships to access the nine businesses.

The issue is one that has come to the attention of President Bush, who met last month with Blanchard. Other influential political donors have a financial stake, too, including Donald "Buddy" Bollinger, who gave $50,000 to the Republican National Committee in 2004 and who owns a shipyard that would be affected by Mr. Go's closure.

"That 18-month [Army Corps] study will cause those nine companies to relocate to other states, other ports," says Gary LaGrange, port president. "We cannot afford to lose one job."

MRGO critics do not oppose a bailout, so long as the canal is permanently closed. "Let's pay them off," says Oliver Houck, professor of environmental law at Tulane University. "We're not safe unless we pay them off." He and others argue that the MRGO is an egregious example of corporate welfare.

Some 289 ships use the canal each year, according to the port's Mr. LaGrange. The US government spends $7 million to $8 million a year to maintain it, amounting to significant subsidy for the users.

"Despite the ... hundreds of millions spent maintaining it, the canal never lived up to its potential. Less than 3 percent of New Orleans ship traffic is using Mr. Go," says critic Robert Verchick, professor of environmental law at Loyola University New Orleans.

New Orleans Cold Storage, Blanchard's company, is one of those users. Poultry companies ship to his plant, where their products are frozen and then loaded onto ocean-going freighters destined for places like the Ukraine. With its blast freezers and storage rooms next to the water, NOCS had a cost advantage over competitors. Orders soared, and the firm planned to expand.

But with the MRGO now silting in, the big freighters dock on the Mississippi River. The frozen chicken is loaded onto trucks for a 15- to 20-minute ride to the riverfront. "Every one-quarter of a cent per pound extra is important," says Blanchard. He might move his operation to another port in another state if something is not done, he says. Meanwhile, he's repairing damage to his facility from the storm surge.

In January, Blanchard was one of four businessmen who met with Mr. Bush to talk about Katrina's effect on their businesses. After explaining his situation, Blanchard says, the president told him, "That's not right. We need to do something about that."

Houck, though, is not so sure the port has a case that the government owes businesses anything. "There is no legal requirement to maintain [MRGO]," he states.

MRGO construction started in 1956 and was finished in 1963. Impetus for the channel dates from the 1940s, when proponents said the Mississippi River - with its propensity to silt up - could not be counted on as a shipping lane. The argument won over President Dwight Eisenhower and Congress, which authorized a channel that would be maintained at 36 feet deep.

For more than 20 years, critics have warned that the canal might funnel a storm surge into New Orleans. The risk has become greater over time, as saltwater incursion killed off vast swathes of swampland that had protected inhabited areas. The Jefferson Parish Council recently voted against reopening the channel. Privately, port officials say they expect MRGO to be closed.

Despite the hubbub over Mr. Go, the port has bounced back. In the past two weeks, shipping activity is back to pre-Katrina levels - even with Mr. Go closed to deep-keel ships, says LaGrange. The port is the largest receiving point for imported steel, rubber, and plywood. It's the second largest destination for coffee. Cruise ships are expected to return to New Orleans by fall.