A Practical and Sustainable Solution to the Congestion at the Panama Canal By Dr. John Stagl - April 27, 2024

History

The dream of digging a water passage across the Isthmus of Panama uniting the Atlantic and Pacific oceans dates back to the early 16th century.  Nevertheless, one of the first attempts to actually create the canal was by the French in February of 1881. Throughout the endeavor, the French were significantly challenged by the nearly impassable jungle; day upon day of torrential rain, insects, malaria, snakes, swamps, hellish heat, smallpox, yellow fever and the mighty Chagres River.  Most engineers deemed the task impossible.  Unfortunately, there were nearly a thousand deaths early on due to many factors, however principally they were a direct result of disease carrying mosquitoes.  After 11 miles of canal had been dug and more than 20,000 men had died by 1888 and nearly 300 million dollars was spent, the project was declared unsuccessful and essentially abandoned.  As such, the canal remained unfinished.  Nevertheless, the dream remained alive. 

In 1892 with the urge of President Roosevelt, the United States reached an agreement to buy the rights of the French canal property and equipment for a sum not to exceed $40 million. Through rigorous and challenging negotiations with Colombia at the time, an agreement was made to move forward with the project. Subsequently, on November 3rd, 1903, the nation of Panama was born declaring its independence from Columbia.  In 1904, the U.S. took over with a payment of $10 million to secure the Canal Zone. With the agreement, they obtained the rights to build, and then set out to write the Panamanian Constitution.  As construction began, the Americans were soon met with the same fate as the French.  Yellow fever was a considerable deterrent however utilizing tactics developed in Havana years before by killing the mosquitoes, Dr. William Gorgas became the chief sanitation officer of the Panama Canal.  

By draining the swamps and the widespread use of pesticides, Dr. Gorgas’ solution proved to be a godsend.  Ultimately, this provided for entire towns to be developed with housing, churches, schools, and a brand new social construct.  Therefore, before the end of the next year, yellow fever had been officially eradicated.  The new engineering provided a means to damn the Chagres River to create Gatun Lake, thus becoming an integral part of the canal system.  However, it wasn’t until May of 1913 that the first tugboat traveled successfully through the first set of locks and out into the lake.  On August 15th 1914 the Panama Canal officially opened.  Today, the Panama Canal remains as a 50 mile long, man-made canal cutting through the Isthmus of Panama that connects the Pacific and Atlantic oceans and is considered the single most significant engineering accomplishment of the United States. 

Engineering: How it Works

The Panama canal uses a system of locks with two lanes moving ships in either direction that operate as water elevators, raising ships approximately 26 meters from sea level to the level of Lake Gatun and then lowers them on the other side back to sea level. As mentioned previously, this is truly an engineering marvel, yet not without challenges.

The Problem Today

To raise the ships during passage, the canal needs to be filled with fresh water by gravity in order to separate the salt water, with the accompanying flora and fauna, from the water of the two oceans. Lake Gatun is a man-made lake from the Chagres River and other rivers that act as a source of freshwater.  Unfortunately, in times of drought when water levels are diminished, the amount of ships passing through the canal is gravely affected. The problem is so vast that many surrounding countries are looking for alternative means of travel in an effort to connect the Atlantic and Pacific oceans for a more practical and efficient delivery process.  As such, the fate of this historic engineering marvel remains affected by the weather.  When looking at the problem, we can clearly see we cannot control the weather and changing the construction of the canal itself would be cost prohibitive.  Therefore, the problem boils down to one single issue; insufficient fresh water levels of Lake Gatun to provide safe passage of ships.

The Facts

On January 1st, 2024 water levels in Lake Gatun were almost 6 feet lower than the prior January.  Consequently, insufficient water supply jeopardizes ship passage.  By reducing the number of passages through the canal, this helps conserve water, because huge amounts are used up every time a ship goes through the locks as it travels the 40 miles across Panama.  But that’s not all. Keep in mind that the lake also supplies drinking water to millions of residents in the central region of the country which includes Panama City and Colon.  The drought also presents tough choices for Panama’s leaders, who must balance the water needs of the canal with those of residents; over half of whom rely on the same sources of water that feed the canal.

Local and Global Economic Effects

Ship transits are currently limited to 24–26 per day being somewhat dependent on size. Under optimal conditions, it is speculated that 32–40 ships may transit depending on size and scheduling. The unreliability of transit through the canal has caused ships to reroute.  As the Panama Canal accounts for approximately 5% of global shipping, disruptions affect the entire worldwide supply chain.  The end result; more fuel usage, delayed shipments, and overall loss of productivity.

An Alternate Solution

The following information was reported in the New York Times on November 1, 2023 by Peter Eavis.  “In optimal terms, the canal can handle 38 transits per day, so 12 to 15 is a lot,” said Rodrigo Noriega, a lawyer and a columnist for Panama’s La Prensa newspaper.  Building the reservoir is expected to cost nearly $900 million, and the canal authority could start accepting bids from contractors toward the middle of next year with construction starting early in 2025.  But that timeline could well be delayed; the construction of larger locks was completed two years late, in 2016, and that project was marred by cost disputes.  The new reservoir would also involve acquiring land that is protected by a 2006 law, and displace at least some of its inhabitants.  Mr. Noriega said he expected Panama’s legislature to pass a law that would lift the ban on acquiring land. But he and others note that new water sources could also be built in other places.  Without a new water source, the canal could lose significant amounts of business.  Other ocean routes are, of course, longer and more expensive, but they are less likely to have unpredictable delays. One alternative is to transport goods between Asia and United States through the Suez Canal to the East Coast and Gulf Coast.  Another is to ship goods from Asia to the West Coast ports — and then transport them overland by train or truck.  “In theory, something that offers a cheaper, shorter route should always be in favor, but it’s the uncertainty that can be a killer,” said Chris Rogers, head of supply chain research at S& P Global Market Intelligence.

A Sustainable Solution for Everyone

The north end of the canal is the closest to the Atlantic Ocean where the Gatun locks are located.  The south end of these locks (on the freshwater side) stretches north to the Atlantic (the salt water side) approximately 2.0 km.  Returning to the premise that the primary issue remains there is inadequate freshwater available to fill the locks for maximum capacity, this proposal would be to build a desalination plant in this vicinity.  Based on recent Google Erath images, it appears there may be room for development given the appropriate authority and legal permissions in place.  As such, it could provide an inexhaustible supply of ocean water to the plant in order to process the sea water to match the existing lake water or rainwater, and then add the processed water to the existing freshwater infrastructure (Lake Gatun) with minimal impact on the environment.  Like all major industrial facilities, desalination plants can negatively impact local environments if not properly safeguarded.  Ensuring intake pipes don’t harm marine life, managing brine output, and reducing carbon footprints are top priorities for operators and regulators today.  Before proceeding, engineering would be required to address each of the aforementioned concerns.  So let us take a look at the development costs and the subsequent impact of the solution and the change in revenue for the great Republic of Panama for years to come.

Cost of Development Versus Revenue

Desalination significantly reduces the salinity to yield water with less than 500 ppm total dissolved solids. This fresh product water meets recognized standards for safe, reliable supplies. So where are the largest plants located in the world? Upon a Google search, the top global desalination plants, and the most effective desalination plants are in the Middle East and North Africa.  Most of the existing plants have had challenges associated with initial funding as well as the significant costs related to operations. Some concerns include available land for extensive facilities, reliable access to high-volume seawater sources, limited impact on sensitive marine environments, power grid connectivity, water transmission infrastructure to inland demands and of course, resources of a skilled technical workforce.  To address the financial consideration up-front, typically water supply to the community does not usually generate massive returns.  However, Panama is unique in that as soon as the volume of water rises to allow a single ship to pass through; significant income is generated to provide a substantial and predictable ROI.

What does it Cost to Build a Desalination Plant?

In an article posted on January 7, 2024 by Gunnar Herber entitled Plant Prices: The Costs of constructing a desalination plant and facility, Mr. Herber goes into much detail regarding the various nuances involved in the capital costs associated with building a desalination plant. Considering factors such as infrastructure acquisition, pipelines, proximity to source water, materials availability and costs, both technical and engineering expertise and more, estimating capital expenditures can be demanding and difficult. Therefore, it may be prudent to over-estimate the costs in this proposed solution as to not to run short of funds before completion.  Naturally, a major consideration would be to know the water volume output required as this would determine the size of the facility. Consider that each ship passing through the lock will require 500,000 gallons per transit.  Eleven ships (near maximum capacity) would require an additional 5.5 MGD (5,500,000 gallons per day).  When considering the additional freshwater needed to bring the canal to maximum capacity, it would be prudent to build a plant to produce 10 million gallons of water per day or a 10 MGD plant (as it is often expressed).  Again, it doesn’t hurt to over-estimate, as we want to be sure this is actually self-sustaining both in water volume and in ROI (cash flow).  Research suggests the estimated total capital cost for building reverse osmosis desalination plants varies in different parts of the world: However, specifically in North America — A 5 MGD plant would cost $12–18 million.  A 25 MGD plant estimate is $60–100 million.  Therefore, to be practical, based on these estimates, the capital cost of building a 10 MGD desalination plant in Panama would likely fall between $30–50 million. Therefore, on the outside, we will consider the $50 million estimate to be reasonable. 

When considering the cost of consultants and engineers, this number should be closer to $52 million.  Is this a good investment? Absolutely!  Within a matter of months, the initial capital outlay could be recovered as more ships transit the canal with ongoing cash flow for maintenance and overhead of the new facility.  Naturally, there are significant operating costs yet with the increase in revenue and the overarching benefit to the country; this would solve a major world-wide problem.  Let’s do the math…..Based on several different sources, it is estimated that the existing number of transits per day is limited to 24–26 vessels due to insufficient freshwater to fill the locks. Once desalination is in operation, the projected revenue is a game changer allowing for daily maximum capacity to return to approximately 37–38 ships depending on size. Ships are ready and waiting for transit, therefore ROI is almost immediate.  With the current average transit fee per vessel to be $150,000, 10 additional transits per day would result in projected additional daily revenue that could exceed $1,500,000 per day.  Bear in mind that this assumes that transit fees remain the same. If the average transit fee only increases $50,000, especially as ships continue to increase in size, this would increase annual revenue by another $200 million.

RESULT: Panama would have a long term solution which provides significant revenue while maintaining its leading position as a world-wide partner to shipping.

Why Might This Be the Best Solution?

• Use of existing land close to the lock and sea water supply
• Economically and environmentally sustainable
• Maintains the existing ecosystem
• Solves the core problem by replacing the lack of rainwater
• Ensures adequate drinking water reserves for central Panama
• Good for Panama and good for the world

Therefore, for the sake of Panama, its people and shipping throughout the world, one should consider the possibilities.  Naturally, there will be challenges but the biggest challenge has already be won — the finalization of an amazing canal and lock system.  Now it is time to take it to the next level.

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Note from the Author:  If you have questions or just want to discuss the potential project, feel free to reach out to Dr. John Stagl directly at jfstagl@gmail.com