Federal judge delivers setback to Delaware port expansion in a win for Philly ports

A federal judge has sided with the Pennsylvania state agency that owns Philadelphia’s seaport facilities in a legal dispute that could affect competition in maritime commerce on the Delaware River.

U.S. District Judge Mark A. Kearney ruled Monday that the U.S. Army Corps of Engineers violated the law when it authorized a dredging and construction permit for Delaware’s proposed new container port. The judge tossed out the permit and another approval.

Delaware earlier this year announced almost $200 million in state funding for the project with private port operator Enstructure, which officials hope will create 6,000 new jobs.

The ruling handed a win to the Philadelphia Regional Port Authority, the state agency known as PhilaPort, and Holt Logistics Corp., whose affiliates operate terminals in Philadelphia and South Jersey.

They’ve been trying to halt Delaware’s expansion since the state’s taxpayer-owned Diamond State Port Corp. in 2017 bought a former DuPont chemical plant in Edgemoor, seeking to build a new container terminal. Delaware’s Wilmington port already competes with Philadelphia. PhilaPort and Holt have argued that the Edgemoor facility would siphon business from upriver ports, rather than bring new trade to the region.

They filed federal lawsuits in the Eastern District of Pennsylvania against the Army Corps in November and earlier this year, alleging that it had failed to consider or mitigate the project’s impact on navigation and safety.

The Philadelphia ports also said the Army Corps failed to evaluate how the new container port would affect the Delaware River Deepening Project — the Army Corps-led initiative, funded by Pennsylvania and federal taxpayers, that deepened the river’s main navigation channel from 40 to 45 feet. The dredging has allowed Philadelphia ports to accommodate bigger ships and thus handle more cargo, supporting thousands of jobs that depend on or benefit from the port.

Kearney agreed with some of those arguments, finding that the Army Corps violated the Administrative Procedure Act. “We find the Corps did not engage in reasoned decision-making” as to the dredging and construction permit because it “failed to consider” the project’s impact “on the public interest in navigation and safety,” the judge wrote.

The judge also said the Army Corps “arbitrarily and capriciously departed from its own procedures” in recommending an approval by not requiring Delaware’s Diamond State Port Corp. to obtain a “Statement of No Objection” from PhilaPort as the nonfederal sponsor of the Deepening Project.

The Army Corps could appeal the decision. A spokesperson declined to comment.

Eugene R. Bailey, Diamond State’s executive director, said the court’s decision “is another example of the ports in Philadelphia trying to stop Delaware from building a new facility at Edgemoor to expand our maritime economy and create jobs for Delaware families.”

“While we were not part of the lawsuit, we will work with the Corps to address any concerns so that we can move forward as quickly as possible,” Bailey said in a statement.

PhilaPort’s attorneys at the law firm Stradley Ronon called the decision a “decisive victory.”

“We were pleased that the judge broadly agreed with our positions, vacating various underlying permits, resulting in the U.S. Army Corps of Engineers reevaluating the project, a huge first step,” Andrew Levine, a partner at the firm, said in a statement.

Leo Holt, president of Holt Logistics, welcomed the ruling and noted that Delaware will have a new governor after next month’s elections. “I think the best use of the communities’ economic and personnel resources is to level-set this project and ensure that the next team that’s coming over the boards in the hockey game called Delaware politics plays by the rules,” Holt said in an interview Tuesday.

He said he encourages political leaders in Pennsylvania, Delaware, and New Jersey to have a “tristate conversation — which happens way above my pay grade — that talks about how best to serve the needs of all the communities on this river system.”

Many of the legal arguments in the case centered on Delaware’s proposed use of a basin that would allow ships exiting the port to turn around to reach the Delaware Bay and Atlantic Ocean.

Because the so-called turning basin would stretch the width of the Delaware River’s main channel, PhilaPort and Holt cited experts who raised concerns about the project’s impact on navigation. Diamond State’s permit application relied on a study that did not look at how this might affect traffic in the channel, the judge said.

“The Corps had an independent obligation to ensure the soundness and reliability of studies and data it relied upon through Diamond State in concluding there would be no impacts to navigation,” the judge wrote. “The Corps did not carry out these duties when responding to comments about the deficiencies in the feasibility study and further studies which might be required.”