Houston trying to balance shipping, energy interests

The port also is looking to speed up a project to widen its main shipping channel.

Houston trying to balance shipping, energy interests

The port also is looking to speed up a project to widen its main shipping channel.

Houston trying to balance shipping, energy interests

The port also is looking to speed up a project to widen its main shipping channel.

 

    The Port of Houston Authority, the pilots that guide ships up and down its 52-mile shipping channel and Texas state legislators all are trying to address the sometimes competing interests of the energy and container shipping industries that use the port while looking for ways to speed up the widening of its main shipping channel.
    Earlier this month the Port of Houston Authority’s commissioners adopted a rule change that could limit the number of very large containerships that call its terminals.
    Under that rule only one vessel that imposes a one-way traffic restriction on all or any deep-water ships transiting the Houston Ship Channel within Galveston Bay may call at a port authority terminal in a given week. Furthermore, the ship cannot call and depart from the terminal on the same day.
      The rule was created to ease concern by the oil and gas industry that if more large containerships start coming to Houston, that might delay the movement of tankers in and out of the port because of a safety rule by the Houston pilots that prevented other ships from meeting and passing in the opposite direction ships longer than 1,100 feet. Movement of those big ships also must be conducted during daylight hours.

    Complicating the issue is the fact that state legislators have waded into the issue of how the pilots should be regulated and how many large ships should be able to transit the waterway.
    Speaking earlier this month, Ric Campo, the chairman of the Port of Houston commissioners, said the growing population in Houston, as well as growth in petroleum exports, means “the port is going to continue to grow and congestion is going to be an issue longer term.
      “We all know that the solution to that problem is to widen the channel. It has been widened 10 times since the 1800s and number 11 needs to happen as soon as possible so we can keep up with this traffic,” he added.
    The Port of Houston operates eight public terminals and handled a record 2.7 million-TEUs of containerized cargo last year, making it the nation’s seventh largest container port after Los Angeles, Long Beach, New York, Savannah, the Northwest Seaport Alliance that oversees the ports of Seattle and Tacoma, and Ports of Virginia.
      But containers only accounted for 17 percent of volumes for the overall port complex. Liquid bulk cargo accounted for 63 percent of the total; project cargo 10 percent; dry bulk cargo 4 percent; and other general cargo (largely steel) 6 percent.
   Bill Diehl, the president of the Greater Houston Port Bureau, which monitors traffic in the port, said there are about 274 facilities in the port, and that about 8,300 ships and 200,000 barges use the Houston ship channel annually.
    The Houston Chronicle said a rule to limit large ships calling Port of Houston terminals to one per week was “pushed by energy companies fearing that especially large container ships will cause traffic jams.” Those companies created a group called the Coalition for a Fair and Open Port to advocate for their views.
    John Rutherford, executive director of the coalition, told the Board of Pilot Commissioners in December that more large containerships a week entering and leaving the port “will likely choke off energy export growth,” according to the minutes of the pilot commission.
    At the same meeting in December, Erik Eriksson, the secretary and general counsel for the pilot board, said container industry representatives did not believe a limit of one transit a day was fair to them.
    Though the restrictions on use of Port of Houston facilities isn’t expected to have an immediate effect as only 11 containerships of the size impacted by the regulation (most operated by Mediterranean Shipping Company) have called at the port since August.

   Shareen Larmond, president of the West Gulf Maritime Association, asked the Port of Houston commissioners not to make hasty decisions that might harm the port. The association represents companies that bargain with the International Longshoremen’s Association at West Gulf ports.
    Houston benefited from disruption to container trade from a longshore labor dispute at West Coast ports in 2012 that “led many shippers to redirect their cargo here,” she noted. “We directly benefited from their brief discord. Let us not repay their generosity by sending that cargo back,” she said.

    Ironically, two days after the seven port authority commissioners passed the rule placing limits on large ships using their terminals, the Houston pilots eased their safety guidelines.
      That wasn’t unexpected, said Eriksson, since the pilots have traditionally modified their rules as they gain experience handling new classes of ships. Even before larger containerships began calling the port, they were honing their ability to handle the ships using electronic ship simulators and manned ship models at a training facility in Louisiana.
    Starting May 1, the Houston pilots will permit containerships with lengths of less than or equal to 1,110 feet and beams of less than or equal to 150 feet to meet other vessels sized less than or equal to 601 feet in length and 106 feet in beam and less than 35 feet in draft.
   The result, said Eriksson, is that the rule on one-way traffic is much less restrictive. Many of the tankers that call terminals in the port will be able to share the channel with large containerships and fewer containerships will be subject to the port authority’s rule since they will not be imposing one-way traffic restrictions.
    The Port of Houston Authority’s two major container facilities — the Bayport Container Terminal and Barbours Cut Container Terminal —are located in upper Galveston Bay.
      Earlier this month the commission laid out plans to press the federal government to widen the channel to accommodate two-way traffic with larger ships and budgeted $500,000 to support an advisory committee with members that include representatives from the pilots and Coast Guard. Their goal will be to “share data and insights and help optimize traffic flow on the channel, in response to continued requests for larger vessels to serve the fast-growing demand of containerized consumer imports, resin and agriculture exports, and the needs of the energy industry.”
      The seven Port of Houston commissioners also serve as the Board of Pilot Commissioners for Harris County Ports. The pilot board meets each month, working with the governor to license Houston pilots who guide ships along the channel.
      But bills have been introduced in the Texas Legislature that propose to separate the jobs of Port of Houston and pilot commissioners.
   “Interested parties have indicated that the two roles the port commission performs may distract from the first and foremost mission: being the primary steward of the Houston Ship Channel,” said a statement from Texas State Sen. Brandon Creighton in which he explained the intent of a bill (S.B. 2222) that proposes the pilots be overseen by a separate, nine-person commission.
    A similar bill (H.B. 4436) has been introduced in the Texas House of Representatives by Reps. Terry Canales and Brisco Cain. In addition to expanding the board, his bill would not allow Port of Houston Authority commissioners to serve on the pilot board.
    Another bill (S.B. 1915) from Texas State Sen. Carol Alvarado also proposes separating the two boards, saying the dual role of the commissioners “causes an inappropriate conflict of interest as the Houston Port Authority is also a market participant and has a financial interest in the traffic decisions that the pilots make every day in the Houston Ship Channel.”
    Yet another bill (S.B.2223) introduced by Creighton seeks to limit “the size of vessels that may operate within the jurisdiction of the board until such time as the board determines that such vessels may be operated safely and efficiently under two-way traffic conditions.” A similar bill has been introduced by Canales (HB4445).
    They authorize “the board to adopt rules authorizing larger vessels if the board receives a recommendation from an association representing at least 50 percent of the pilots operating under its jurisdiction that such vessels may be operated in a safe and efficient manner while maintaining two-way traffic. It requires the board to hold at least two public hearings before the adoption of any such rule and specifies that the board must establish the maximum acceptable length of any such vessels.”
   The Houston Port Authority issued a press release that its commission opposes the Creighton and Canales legislation, saying it “could hinder the future of commerce through the Houston Ship Channel and hurt job generation and economic growth in the Houston region, Texas and the nation.”

    Eriksson said the current system in which the same seven people serve as both commissioners of the port authority and pilot board works well and that the charges of conflict of interest are unfounded. The commission is not only responsible for overseeing the public terminals, it is the local sponsor of the ship channel.
      “I don’t believe those are in conflict with each other. They are both intended to serve the public,” he said.
    Centralizing the roles of both bodies makes for the best results, he said, noting that early in the port’s early history the two boards were separate and sometimes were at odds with each other.
    He also said legislating the rules about navigation would make modification more cumbersome, with this month’s decision by the pilots to ease their restrictions on one-way traffic a good example of how quickly their decisions can be made. He noted in the event of an accident or other emergency, changes to piloting rules might need to be made.

    Rich Byrnes, the chief infrastructure officer for the Port of Houston, said since 2010, the port and Army Corps of Engineers have been conducting a study to see how the port might accommodate larger ships of all sorts, including tankers, dry bulk vessels and containerships.
    In the fall of 2017, the Army Corps said that it was recommending a preferred alternative for widening and deepening various stretches of the 52-mile channel, from Bolivar Roads near Galveston all the way to the turning basin at the end of the ship channel at a cost of about $1 billion.
    While that sounds like a lot of money, Byrnes said that would amount to about 10 cents a ton over the 50-year life of the asset.
    A critical segment of the project is the “main reach” of the Houston Ship Channel traverses Galveston Bay from Bolivar Roads in the south to the northern part of the bay, where the channel turns westward toward the city. Off the main reach there are turnoffs for the channels leading to the Bayport Container Terminal and Barbours Cut Container Terminal.
    Widening the main reach is seen as critical to allow two-way traffic with the growing size of containerships.
    When the Army Corps announced in the fall of 2017 its tentatively selected plan for deepening and widening the channel, it said the main reach might be widened anywhere from 530 feet to between 650 and 820 feet.
    As that plan has been refined, the Army Corps settled on a recommendation to widen only a portion of the main reach through Galveston Bay to 700 feet, a decision that the Port of Houston Authority disagrees with. A final integrated feasibility report and environmental impact statement is expected later this year that will then be submitted to the Corps headquarters in Washington, D.C.
    The Army Corps has told the port it believes there is a favorable benefit cost ration for widening the southern part of the main reach —from Bolivar Roads to an area called Redfish, but not for two other segments, from Redfish to the turnoff to the Bayport Container Terminal and between the Bayport Container Terminal turnoff and the turnoff to the Barbours Cut Container Terminal. It has not made those two sections of the main reach part of the Corps’ National Economic Development (NED) plan.
    In addition to the port authority, Byrnes said the Houston pilots and industry believe the entire main reach should be widened to improve efficiency and safety.
    “If you only widen halfway up, you are basically building a four-lane highway up to a two-lane bridge. It does not make operational sense; it does not provide the safety and efficiency the ship channel needs for today’s ship traffic.”
   He said the port’s executive director in January approached the assistant secretary of the Army asking for an exemption that would basically override the local Army Corps team recommendation and include the deepening in the northern part of Galveston Bay for reasons of safety.
    That was followed up with letters from Campo, the Houston Port Bureau and the state’s congressional delegation.
    He also said that representative of the Economic Alliance Houston Port Region met with federal government officials and legislators to push for the deepening project.
    “The effort has moved from a technical effort to one that also includes advocacy,” he said.
    Byrne said the port also is looking to speak to members of the Trump administration and is coordinating with representatives from industrial and energy companies, retailers and agriculture who support widening the channel. He also said the effort has the support of the Texas congressional delegation.
   “This can be a model project for the nation,” he said.
    The U.S. is expected to see a continuation in the amount of oil and chemicals and plastic resin it exports. The Panama Canal expansion has allowed larger tankers, gas tankers and containerships to call Houston.
    Byrnes said the port is seeking to expedite deepening of the channel and has worked with the Army Corps on ways to reduce the time needed to construct the deeper channel to four years instead of six to 10 years.
    “The problem is that four-year period doesn’t start until 2026,” he said. “What we need to do is creatively take a series process and move it into a parallel process in which we are working on authorization, appropriations, funding the non-federal outlays and design and working them as much together as possible, moving that construction period forward perhaps as fast and as early as five years in advance of business as usual.”
    The estimated cost of the project is more than $1 billion. Typically about 75 percent of a project like the Houston Ship Channel widening would see 75 percent of the construction funded by the federal government and with 25 percent by the local sponsor, the Port of Houston Authority. The local government would then have to contribute an additional 10 percent after the project is completed, though it can take up to 30 years to contribute the additional 10 percent. The local outlay would be about $370 million.
   On top of the construction costs, the cost of maintaining the channel over a 50-year period is expected to be about 70 percent of the construction cost.
    If the dredging of the northern portion of the main reach of the Houston Ship Channel in Galveston Bay is not made part of the NED plan, the local cost might be as much be as much as $600 million to $700 million, though Byrnes said there might be ways to reduce that cost, for example by better planning and reducing the construction period.
    Congress would need to authorize and appropriate funds for the deepening the channel.
    The port is exploring ways to have its local share of the project funded, including ways for private industry to help fund the project so it could be accelerated.
    Options for funding the widening include port authority bonds, a Harris County bond issue, ad valorem fees, setting up a special purpose district comprised of properties that depend on the channel, voluntary contributions from industry and a combination of some of those approaches.

Industries like mining, manufacturing and agriculture are especially dependent on short line rail to move goods to market.

Spot container rates from China/East Asia to the U.S. West Coast stood at $1,531 per FEU as of May 10, up 10.6% year-over-year, while rates from China/East Asia to the U.S. East Coast totaled $2,926 per FEU as of May 10, up 22.2% year-over-year, according to the Freightos Baltic Index.

Most Popular
Latest News
Social Media

Loading...

Hamburg Süd christens Polar Mexico in Veracruz

Hamburg Süd christens Polar Mexico in Veracruz

Embed this story

Share Code Version 1

This version will embed the story headline and includes HTML fallback protection, ensuring the story will display even if some users decide to disable javascript in their browsers.

Copy & Paste the following code to embed this story on your website:

Preview

Houston trying to balance shipping, energy interests

The port also is looking to speed up a project to widen its main shipping channel.

Apr 26, 2019 on Dec 27, 2018AmericanShipper.com

Share Code Version 2

This version will embed the story headline without any styling applied. Use this version if you will use your own custom styling on your website. This version also includes HTML fallback protection.

Copy & Paste the following code to embed this story on your website:

Preview

Houston trying to balance shipping, energy interests

The port also is looking to speed up a project to widen its main shipping channel.

Apr 26, 2019 on Dec 27, 2018AmericanShipper.com