Philly’s seaport is in talks to buy 150 acres from Norfolk Southern as it eyes a big expansion

The state agency that owns Philadelphia’s seaport facilities is in negotiations with Norfolk Southern Corp. to buy 150 acres on the site of the old Philadelphia Navy Base.

Philadelphia Regional Port Authority officials see the potential acquisition as a “generational opportunity” that could create as many as 15,000 jobs — which would more than double the number of jobs the port currently supports — according to Ryan Mulvey, the agency’s director of government and public affairs.

The site, known as Mustin Yard, “represents the last available land at a unique nexus of deepwater, highway, and rail access,” Mulvey said in testimony last week before the Pennsylvania House Transportation Committee.

To close the deal, the port authority, which calls itself PhilaPort, needs a funding commitment from the state, Mulvey told lawmakers.

Acquiring the site would significantly expand the port’s capacity to handle automobiles and containers, the big metal boxes that fuel global trade. PhilaPort reported handling 743,000 container units last year, up 80% over 2016 levels. A key contributor to that growth has been the port’s imports of perishable products like fruit and meat. Port officials project that container volume will double to about 1.5 million units by 2040.

The 150-acre Mustin Yard would be even bigger than the port’s main container terminal, the Packer Avenue Marine Terminal, which sits on 106 acres near the Walt Whitman Bridge.

PhilaPort officials declined to say how much state funding they might need to buy the land or to develop it. Industry observers said the land is likely to cost tens of millions of dollars. A spokesperson for Norfolk Southern declined to comment on the negotiations.

Mulvey said in his testimony that as part of PhilaPort’s five-year plan, it has requested about $530 million in capital funds for 2026 and 2027. However, he told The Inquirer that those requests will likely change in light of $217 million in new federal grants the port secured last week.

The port authority’s request for new state aid comes as competitor ports are ramping up their own investments. Delaware has committed almost $200 million to build a new container terminal near the Port of Wilmington in a partnership with a private operator. The Swiss shipping line Mediterranean Shipping Co. is developing a terminal in the Port of Baltimore.

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While Philadelphia has seen significant cargo growth, it is still a relatively small player among U.S. ports in international trade. For example, the Port of New York and New Jersey handled 7.8 million container units last year — more than tenfold Philadelphia’s volume.

“Competitor ports are sitting out there and ready to eat our lunch,” Mulvey said, adding that some of them, like Delaware, have natural advantages over Philadelphia because they’re closer to the ocean.

PhilaPort’s operations support 12,000 direct and indirect jobs, Mulvey said, generating $90 million in state and local tax revenue. He said developing Mustin Yard could generate an additional $38 million in revenue. The port authority’s consultants found that in a scenario in which the yard is fully developed into a container terminal, that could create 15,000 jobs, Mulvey told The Inquirer.

However, he emphasized the number of jobs and economic impact would depend on several factors, including the amount of capital investment and the type of cargoes handled at the yard. PhilaPort had not shared its underlying analysis with The Inquirer as of Thursday evening. The port has also hired a consulting firm to do a broader economic analysis.

Under Gov. Tom Wolf’s administration, the state invested more than $500 million in new electric cranes and other equipment at Packer Avenue, a 155-acre auto processing center at PhilaPort’s Southport facility on the former Navy base, and new warehouses. Most of that money came from the state’s issuance of general obligation bonds, with the debt service covered by the general fund.

Port officials say the growth in containers and autos — it handled 259,000 Hyundai, Kia, and other vehicles last year, up 40,000 units from 2022 — shows the investment has paid off. The deepening of the Delaware River also enabled Philadelphia to accommodate bigger ships.

Norfolk Southern’s Mustin Yard is adjacent to PhilaPort’s Southport facility, which sits on land that had previously been part of the U.S. Navy Base. After the Navy left in 1996, the Philadelphia Industrial Development Corp. (PIDC) took over the Navy Yard to develop parcels of vacant waterfront land. Several hundred acres were set aside for port expansion, including the area now known as Southport.

In 2014, PhilaPort considered converting Southport into a modern container terminal — an idea that the City Controller’s Office projected would have maximized its economic impact.

The report said using Southport as a storage space for automobiles would generate the least amount of economic activity of the three scenarios envisioned at the time, in part because fewer direct jobs flow from vehicle imports.

But the state was looking for a potential Southport development to be financed primarily through private money, and any developer would have had to compete with the Packer Avenue terminal directly to the north.

Ultimately port and state officials decided instead to upgrade the decades-old Packer Avenue terminal, operated by Gloucester City-based Holt Logistics Corp., and dedicate Southport to autos, where cars are stored before heading to dealer showrooms.

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That delivered a win to the Teamsters union, whose members work the auto yard. PhilaPort leases the facility to logistics provider Glovis America Inc., an affiliate of South Korea-based Hyundai Glovis Co. Ltd.

The dockworkers who unload cargo from ships are represented by the International Longshoremen’s Association. The union’s membership might go on strike next week at ports across the East Coast. PhilaPort’s 11 board members are appointed by the governor and legislative leaders in Harrisburg.

“That’s been good for the auto industry, but it kind of stunted the growth potential for the container business,” said Bob Blackburn, a former top PhilaPort official who left the agency in 2015 before the investment decisions were made. “The bill has come due.”

If the port wants to expand container capacity, it needs more land. “I would imagine it’s not going to be cheap for the commonwealth,” Blackburn said of Mustin Yard. “The railroads historically value their property very high.”

Norfolk Southern in 2002 agreed to build a high-tech freight yard on the old Mustin Field Naval Air Station at the east end of the former Navy base in South Philadelphia. The Delaware River Port Authority owned the land and agreed to finance the $16 million project, with the railroad’s rent payments covering the debt.

Under the agreement, the railroad had the right to repay the loan and take title to the yard at any point in the lease period. Property records show the DRPA conveyed the land to the railroad in 2008. Norfolk Southern declined to discuss the condition of the site.

The negotiations with Norfolk Southern come as U.S. Sen. Bob Casey (D., Pa.), a Democrat who’s up for reelection this year, and Philadelphia’s congressional delegation announced last week they had secured $217 million in federal aid to expand the Southport terminal’s “operational capacity.”

The port authority had already received funding to build its first new berth — a place where ships can stop to transfer cargo — in 50 years. That project is expected to be completed in 2026. The new round of funding — made available through the Infrastructure Investment and Jobs Act, which was signed into law by President Joe Biden in 2021 — will enable the port authority to build a second berth and infill construction, which will expand the port by 10 acres.

The new berth, which is projected to be completed in 2027, will alleviate congestion for container ships at Packer Avenue, Mulvey said, as ships carrying autos will be able to dock at Southport instead.

Amid all that new construction, the port authority is expecting another source of demand at Southport, as Norwegian Cruise Line announced in July that it will start docking there in 2026 to pick up passengers for voyages to Bermuda.

News researcher Ryan W. Briggs contributed to this article.