The State of Texas' Ports

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2014 Texas Port Report

Working with others to provide safe and reliable transportation solutions for Texas

125 EAST 11TH STREET | AUSTIN, TEXAS 78701-2483 | (512) 305-9500 | WWW.TXDOT.GOV

January 20, 2015

Fellow Texans,

Texas ports and shipping lanes have been vital to the Texas economy since our creation.

History has shown, however, that Texas has often taken a “hands-off” approach to investing in maritime infrastructure.

Today, Texas ports are struggling to keep up with competitors in neighboring states who are leaping ahead because these states are making strategic port investments.

Ironically, The Port of Charleston received a $1.3 billon commitment from South Carolina for port development to process plastic resins produced in Texas.

Texas faces four major “mega-trends” that are drastically demanding more capacity from our ports and shipping lanes. Those trends are: 1. Population explosion; 2. Dramatic growth of oil and gas production; 3. Panama Canal’s new shipping lane and 4. Mexico’s robust economy (our number one maritime trading partner).

For good reason, the Texas Legislature recognized the importance of the maritime system and asked TxDOT to incorporate ports and waterways into transportation system planning. TxDOT has revitalized the Port Authority Advisory Committee (PAAC) to develop a more strategic Port Capital Program. (The PAAC is working with Texas ports to identify needs both “inside the gate” such as dock and storage improvements, as well as “outside the gate” to address connectivity to the transportation system). TxDOT has also taken an in depth examination of the Gulf Intracoastal Waterway (GIWW) in the GIWW Master Plan.

On behalf of the Texas Department of Transportation and my fellow commissioners, I am pleased to present this report on the state of Texas ports. Texas is the nation’s leading export state and a leader in waterborne trade. In order to maintain this position and serve our growing $1.5 trillion economy, it is imperative the state seek ways to invest in the maritime system.

Sincerely,

Jeff Moseley Commissioner, Texas Department of Transportation

CC: Greg Abbott, Governor, Texas Dan Patrick, Lieutenant Governor, Texas Joe Straus, Speaker, Texas House of Representatives Texas Transportation Commission

OUR GOALS MAINTAIN A SAFE SYSTEM ▪ ADDRESS CONGESTION ▪ CONNECT TEXAS COMMUNITIES ▪ BEST IN CLASS STATE AGENCY An Equal Opportunity Employer

The State of Texas’ Ports A work in progress Maritime Division

TABLE OF CONTENTS

LIST OF TABLES ...... iii LIST OF FIGURES ...... v EXECUTIVE SUMMARY ...... vi CURRENT TRENDS IMPACTING TEXAS PORTS ...... vi TEXAS’S ROLE IN MARITIME TRADE ...... vii TEXAS PORT ASSETS ...... viii PORT AUTHORITY QUESTIONNAIRES ...... viii FINANCING OF PORT INFRASTRUCTURE ...... ix TOPICS FOR FUTURE CONSIDERATION ...... x SECTION 1 PURPOSE OF THE REPORT AND AN OVERVIEW OF TEXAS PORT FACILITIES ..... 1 CLASSIFICATION OF TEXAS PORTS ...... 2 REMAINDER OF THE REPORT ...... 7 SECTION 2 PORT ASSET MATRIX ...... 8 TERMINAL ASSETS ...... 8 NAVIGATIONAL ASSETS ...... 11 HIGHWAY ASSETS ...... 14 RAIL ASSETS ...... 17 INTERMODAL ASSETS ...... 20 CARGO HANDLING ASSETS ...... 23 STORAGE ASSETS ...... 25 MARKET ASSETS ...... 28 CONCLUSIONS ...... 31 SECTION 3 PORT QUESTIONNAIRES ...... 32 BARRIERS TO GROWTH ...... 32 PORT STRENGTHS ...... 35 BETTER UTILIZING THE GIWW ...... 37 VALUE OF THE PAAC AND OPPORTUNITIES FOR IMPROVEMENT ...... 40 VISIONS OF THE NEAR FUTURE AND HOW TXDOT CAN ASSIST ...... 42 VISIONS OF THE LONG-TERM FUTURE ...... 44 SUMMARY ...... 48 SECTION 4 PORT FINANCE ...... 49 PORT ACCESS ACCOUNT FUND ...... 49 TRANSPORTATION REINVESTMENT ZONE (TRZ) ...... 50 TEXAS MOBILITY FUND ...... 50 OTHER STATE AND FEDERAL FUNDING SOURCES ...... 50 WATER RESOURCES REFORM & DEVELOPMENT ACT (WRRDA) OF 2014 ...... 51

PORT FUNDING TOOLS IN OTHER GULF STATES ...... 54 SUMMARY ...... 56 SECTION 5 TOPICS FOR FUTURE CONSIDERATION BY THE TEXAS TRANSPORTATION COMMISSION ...... 57 SOURCES ...... 61 APPENDIX A OVERVIEW OF CURRENT MACROECONOMIC TRENDS AFFECTING TEXAS PORTS ...... 64 APPENDIX B UNDERSTANDING TEXAS’S MARITIME TRADE ...... 84 APPENDIX C PORT PROFILES ...... 99 APPENDIX D GLOSSARY OF MARITIME TERMS ...... 100

LIST OF TABLES

Overview of Texas Ports in the TPA ...... 5 Terminal Assets at Texas Ports ...... 10 Navigational Assets at Texas Ports ...... 13 Highway Assets at Texas Ports ...... 16 Texas Ports Located in Rail Districts ...... 18 Rail Assets at Texas Ports ...... 19 Number of Loaded TEUs Handled at Texas Maritime Ports, 2012 ...... 20 Intermodal Assets at Texas Ports ...... 22 Cargo Handling Assets at Texas Ports ...... 24 Storage Assets at Texas Ports ...... 27 Summary of Market Assets for Texas Ports ...... 30 Respondents to TxDOT’s 2014 TPA Questionnaire ...... 32 Self-Identified Barriers to Growth at Texas Ports ...... 34 Self-Identified Port Strengths ...... 36 How to Better Utilize the GIWW ...... 39 Value of the PAAC and How It Can Be Improved ...... 41 Ports’ View of the Near Future and Opportunities for TxDOT’s Assistance ...... 43 Vision of the Port in 20 Years and Its Service to the State of Texas ...... 46 Port Designations under the Water Resources Reform & Development Act of 2014 ...... 53 Top 10 Texas Exports: 2012-2013 ...... 70 Top 10 Countries for Texas Exports: 2012-2013 ...... 70 Volume of Intermodal Containers (TEUs) Handled at U.S. Gulf of Mexico Ports ...... 78 Landed Price of LNG at Select Locations around the World, November 2013 ...... 80 Total Maritime Tonnage Handled by State (Short Tons), 2007-2011 ...... 85 Total Tonnage of Maritime Cargo Shipped (Short Tons), 2007-2011 ...... 86 Total Tonnage of Maritime Cargo Received (Short Tons), 2007-2011 ...... 87 Total Intrastate Maritime Tonnage Handled by State (Short Tons), 2007-2011 ...... 88 Texas’s Total Maritime Export Trade by Trading Partner (Short Tons), 2007-2011 ...... 89

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Texas’s Total Maritime Import Trade by Trading Partner (Short Tons), 2007-2011 ...... 90 Destinations of Cargoes Handled at Texas Ports, 2007-2011 ...... 91 Origins of Cargoes Handled at Texas Ports, 2007-2011 ...... 92 Total Tonnage of Maritime Goods Originating from Texas, 2007-2011 ...... 93 Total Tonnage of Maritime Goods Destined to Texas, 2007-2011 ...... 94 Texas’s Total Maritime Export Trade by Mexican Port (Short Tons), 2007-2011 ...... 95 Texas’s Maritime Exports to Mexico by Commodity, 2007-2011 ...... 96 Texas’s Maritime Trade with Mexico’s Ports (Short Tons), 2007-2011 ...... 97 Texas’s Maritime Imports from Mexico (Short Tons), 2007-2011 ...... 97

LIST OF FIGURES

Texas’s Population Trends, 1993-2013 ...... 66 Net Migration to Texas: 1993 – 2013 ...... 67 Employment Growth in Texas: 2000 – 2013 ...... 68 Annual Employment Change in Texas by Industry: 2010 - 2013 ...... 69 Operating Gas Wells in Texas, 1990 – 2012 ...... 72 Annual Natural Gas (Mcf) and Oil (Mbbl) Production in Texas, 1990 – 2012 ...... 73 Tonnage of Cargo Transiting the Panama Canal and Originating from the Eastern United States (Long Tons), FY 2000-FY 2012 ...... 74 Tonnage of Cargo Transiting the Panama Canal and Destined for the Eastern United States (Long Tons), FY 2000-FY 2012 ...... 75 Destinations of Cargo Transiting the Panama Canal from U.S. Gulf Ports ...... 76 Tonnage of Cargo Transiting the Panama Canal and Destined for U.S. Gulf Ports (Long Tons), FY 2000-FY 2012 ...... 77

EXECUTIVE SUMMARY THE STATE OF TEXAS PORTS

Texas ports are the state’s gateways to the world. The state’s port system moves many of the products we sell and the goods we buy to sustain and grow our economy. The impact of Texas ports is felt far beyond the Gulf Coast region. This is because Texas ports serve a myriad of economic activities, from energy exploration and production to manufacturing to agriculture to warehousing and distribution. These activities reach into every corner of the state from the largest metropolitan economies to the smallest Texas towns and rural areas and even to the individual household. Through Texas ports we ship the crops we grow, the products we manufacture, the food we eat, the energy we need for our vehicles, and countless other essential items we consume at home or use in business. Our ports are important investments that require ongoing maintenance and, as demand dictates, expansion. Despite their importance, Texas ports have maintained a relatively low-profile at the state level, because they have historically addressed their needs at the local level. However, as economic competition intensifies, many states are taking a more proactive role in supporting and positioning their ports to attract new industry. The purpose of this report is to familiarize the members and staff of the Texas Transportation Commission with the member ports of the Texas Ports Association (TPA), as well as to provide an overview of current issues, needs, and concerns among port administrators.

The information presented in this report was gathered during a series of visits to member ports of the TPA between late-2013 and early-2014 by Texas Transportation Commissioner Jeff Moseley and staff from TxDOT’s Maritime Division. Additional information was gathered from questionnaires distributed by TxDOT to TPA members, along with TPA members responding to other data requests from TxDOT. Supplemental sources of information included trade data from the U.S. Army Corp of Engineers (USACE) and the U.S. Maritime Administration (MARAD), as well as data from each port’s website and the TPA’s website.

CURRENT TRENDS IMPACTING TEXAS PORTS As of mid-2014, Texas ports are operating within an environment of strong demand and new opportunities, much of which have been sparked by exploration and production in the energy industry. However, strong population growth and general economic expansion in Texas are also providing a firm underpinning to sustain this growth. On the horizon is the completed Panama Canal expansion, which is anticipated to be a positive contributor to the Texas economy and is expected to open in the next 18 to 24 months.

Among these trends, the dramatic growth of oil and gas production is currently having the most significant impact on Texas ports. Ports in South Texas have seen a strong uptick in their tonnage handled as they move frac sand, pipes, machinery, and other cargoes related

to oil exploration and production in the Eagle Ford Shale. However, the impacts are not limited to these ports. The Port of Beaumont is handling large volumes of crude oil produced in Colorado and Wyoming and many private terminals are receiving oil and gas for refining or processing. Producers of natural gas are also looking to export through a number of new liquefaction facilities being planned along the Texas Gulf Coast. Additionally, billions of dollars of private investment is being made along the Houston Ship Channel to build petrochemical plants that will use the state’s cheap and abundant natural gas to produce plastic resins for containerized export.

TEXAS’S ROLE IN MARITIME TRADE Texas’s maritime activities have contributed greatly to the state’s wealth, employment, and worker salaries. Within the maritime industry, Texas is among the nation’s leading states, handling 15.8 percent of total U.S. cargo between 2007 and 2011. As the nation’s leading export state, it is not surprising that Texas ports handled 20.1 percent of the nation’s total export tonnage during this same period. Texas ports also received more than one-quarter (26.7 percent) of the total foreign tonnage handled in the United States. Put another way, the volume of maritime goods received by Texas ports and the state’s private terminals was 65 percent larger than the volume that was shipped out.

It is important to note that while Texas receives more goods than it ships, which implies a state trade imbalance, much of this tonnage enters into the petroleum refining process and is rendered into gasoline, diesel, jet fuel, and other petroleum products that are sold domestically and internationally. The refining process is a value-added activity that generates wealth for Texas, which is only possible due to the imports of feedstock. Similarly, chemicals are also imported to produce more sophisticated chemicals or products, which are then exported, often never going further inland than the Texas Coast. In short, the importing of goods into Texas ports is critical to the state’s economy and provides the necessary inputs for value-added activities that generate wealth for the state rather than reduce it.

Another important aspect of Texas’s maritime trade is the volume of its intrastate movements, which occur mostly along the Gulf Intracoastal Waterway (GIWW). Texas leads the nation in the total volume of intrastate maritime cargo handled at 305.7 million tons between 2007 and 2011. Texas’s interstate maritime trade plays a smaller role. For example, less than 20 percent of the trade originating from Texas had a destination in another U.S. state between 2007 and 2011. This high volume of intrastate trade (along with interstate movements) is significant because every ton of cargo handled on Texas’s waterways reduces or eliminates its need to utilize the state’s road, rail, or pipeline networks. As a result, Texas’s coastwise maritime trade plays a key role in managing congestion and reduces the need to build new transportation infrastructure. Additionally, many of the cargoes moved on water are hazardous materials and maritime vessels provide

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the safest mode for their movement. Regardless of the origin or destination of the state’s domestic maritime cargoes, TxDOT’s role as the non-federal sponsor of the GIWW means it must closely follow the activities and needs along the waterway. During mid-2014, TxDOT will release a GIWW Master Plan, which will assist TxDOT with developing its plans, policies, and strategies over the coming years. Texas maritime trade is a key component of overall freight movement in the state. The findings of this report as well as the GIWW Master Plan will be incorporated in the state’s Freight Mobility Plan.

TEXAS PORT ASSETS With 11 deep draft ports and several shallow water ports that handle commercial cargo, Texas port infrastructure is geographically dispersed, significant in scale, and tailored to the needs of its customers. To better inform the members of the Commission on the characteristics of Texas ports, an infrastructure inventory of TPA members was developed. The original asset matrix created for this high level overview became so extensive that it was broken into eight components so it could be more easily understood. The eight components of the asset matrix are: • Terminal assets; • Navigational assets; • Highway assets; • Rail assets; • Intermodal assets; • Cargo handling assets; • Storage assets; and • Market assets.

Despite their similarities, Texas ports differ so that no two ports are alike. In fact, Texas port directors emphasize their ports’ uniqueness with the saying, “Once you have been to one Texas port, you have been to one Texas port”. Although Texas’s port network is resource rich, the sustained growth of the state’s economy has placed heavy demands on port infrastructure. Many of the investments made in Texas ports were made decades ago and years of heavy use are taking their toll. Unfortunately, the replacement or expansion of this infrastructure will be neither quick nor cheap.

PORT AUTHORITY QUESTIONNAIRES Earlier this year, TxDOT sent a questionnaire to TPA members to better understand the conditions and issues at their port. The administration of each port was asked to respond to questions around the various themes and their responses are summarized below: • Barriers to Growth - Generally, the barriers reported by the ports could be grouped into four categories: the need to build port infrastructure to respond to growing demand; the need to replace infrastructure that is beyond its productive lifespan; the need for maintenance dredging of ship channels and the GIWW or channel

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deepening or widening; and the need to build or replace landside infrastructure serving the ports. Weaved throughout the discussion of many of the ports’ responses was the need for additional funding sources. • Port Strengths - The ports’ wide-ranging responses reflected the diversity of Texas ports, with regard to the services they offer, the value of their tenants, and their port and channel infrastructure. • Better Utilizing the GIWW - All the responding ports viewed the GIWW as an important component of serving their existing customers. Some ports have reported sizeable increases of traffic on the GIWW that have been spurred by the oil and gas industry. Almost all of the ports identified improvements to the GIWW or maintenance dredging as very important. Most port authorities emphasized the need to continue maintenance dredging of the GIWW and to bring it down to its authorized depth of 12 feet. There was also some interest on developing a Marine Highway along the GIWW to encourage the shift of cargo from trucks to barges. • Opportunities to Improve the Port Authorities Advisory Committee (PAAC) - Many ports urged TxDOT to use the PAAC less as a platform for disseminating information and more as a tool for coordinating and promoting the mutual agendas of TxDOT and Texas ports, as well as to promote the allocation of state funds for transportation infrastructure improvements outside and, possibly, inside the ports. • How TxDOT Can Assist in the Near Future - The ports’ responses to this question varied a great deal. Continuing TxDOT’s role as the developer of the state’s highway infrastructure and maintaining good mobility was stated directly and indirectly. Many ports envisioned TxDOT’s role as being a greater advocate for the port authorities’ interests. It was also suggested by some ports that TxDOT work with the PAAC and the TPA to encourage the Texas Legislature to fund the Port Access Account Fund established under Chapter 55 of the Texas Transportation Code. • Visions of the Long-Term Future - Texas ports were optimistic about their future and the future of the Texas economy. As would be expected, most ports mentioned their current and future role in regional and statewide economic development, job retention, and job creation. Many of the ports also emphasized their desire to continue serving their existing, as well as, future customers. Another common theme in many of the responses was their future role in energy exploration, production, and transportation. This future includes roughly $50 billion of investment in petrochemical manufacturing along the Houston Ship Channel, as well as $30 billion along the Freeport Channel, that is happening now. Both Ports are members of the same Metropolitan Planning Organization (MPO), which will be tasked with planning for the growth that will surely follow this future investment.

FINANCING OF PORT INFRASTRUCTURE Although most ports are subdivisions of the State of Texas, Texas ports have not historically received direct funding from the state for port infrastructure. The lack of state funding has meant that Texas ports have become largely self-sufficient, barring federal funds that are ix

usually targeted to channel dredging or homeland security. This self-sufficiency has also meant that ports have developed a strong sense of autonomy and cautiousness.

During 2012, Texas ports spent in excess of $300 million of their own funds (through their revenues or bonding authority) on capital expenditures. In 2001, the Port Access Account Fund was created by the 77th Texas Legislature to provide funds for Texas ports to finance security improvements, port infrastructure projects, and related studies. However, since 2001, the Texas Legislature has not appropriated funds to the Texas Port Access Account Fund. In comparison, other states along the Gulf of Mexico (with the exception of Alabama) are actively funding their ports to improve their competitiveness.

Despite the lack of direct state funding, there are other potential financing tools available to ports and the local governments that support them. A Transportation Reinvestment Zone (TRZ) is a delineated, underdeveloped area, where a new transportation project is to be built. Generally TRZs allow a sponsoring entity to capture incremental tax revenue so it can be reinvested in a project designated within the zone. Another tool is the Texas Mobility Fund. Initially established only for highways, the 83rd Texas Legislature expanded eligibility for the Texas Mobility Fund to ports. However, port eligibility is dependent on passage of the Constitutional amendment on the November 2014 ballot.

On June 10, 2014 the President signed the Water Resources Reform & Development Act (WRRDA) of 2014, which was a bipartisan effort to address many of the funding shortfalls and inefficiencies that ports experience when developing projects. USACE studies for projects are now limited to three years in length. WRRDA also rectifies the allocation of the Harbor Maintenance Trust Fund (HMT) tax. One of the most important elements of the WRRDA is that it stops the redirection of funds collected specifically for the purpose of harbor maintenance. This change will occur incrementally, so that by FY 2025, 100 percent of the revenue collected from the HMT will go to that purpose. WRRDA will also allocate fixed percentages of the HMT Fund to ports with low tonnages (“emerging” ports), energy intensive ports, and ports that have not received dredging funds over the past six years.

TOPICS FOR FUTURE CONSIDERATION The sections below identify key areas for future investigation and consideration by the Texas Transportation Commission that were identified during the preparation of this report. Many of these topics were identified by the TPA members during their interactions with TxDOT, through the questionnaire of TPA members, and participation at a PAAC meeting held during March 2014. • Explore Infrastructure Investment Opportunities – Consider identifying categories of key infrastructure improvements for ports that TxDOT can assist with (such as road and rail access, overweight truck corridors, removal of at-grade rail crossings,

inadequate air draft clearance, etc.) and request that ports submit competitive proposals to TxDOT for funding those projects. • Provide Leadership for Texas’s Dredging Needs – As the state’s transportation agency and the non-federal sponsor for the GIWW, Texas ports look to TxDOT to provide leadership for the state’s dredging needs. This desired leadership is not necessarily related to funding dredging projects. Rather, Texas ports are looking for TxDOT to use its influence and take a proactive role in its relationship with the USACE to actively promote dredging projects along Texas ship channels and the GIWW. • Port Infrastructure Funding - Texas is among a minority of U.S. coastal states that do not provide state funds for their ports, with Louisiana and Florida being the most active among Gulf ports. The most direct mechanism for providing funds for port improvements would be for the Legislature to obligate funds to the Port Access Account Fund, found in Chapter 55 of the Texas Transportation Code. While Texas ports would benefit from infrastructure funding, especially the smaller ports, the consensus is that they do not want new state funding for port infrastructure projects if the funds must come at the expense of TxDOT’s traditional investment in landside transportation projects. Expanded funding for all the ports’ needs is the desired goal. • Maintain a Transportation System Approach – TxDOT’s statutory and constitutional responsibility is to build and maintain the state’s roadway network, but other transportation modes can also be a means to reducing congestion and improving mobility. Several Texas ports have expressed an interest in the development of a marine highway along the Texas segment of the GIWW, which could encourage more freight movements to occur along the GIWW and mitigate congestion along the state’s roadway and railway networks at a relatively low cost and with fewer environmental impacts. • Encourage Commodity Diversification at Texas Ports – Texas’s maritime trade is highly dependent upon the petrochemical industry for the cargoes it handles. While this specialization has unquestionably benefited Texas ports, it would also be prudent to encourage growth in other commodity markets so that natural market fluctuations have less impact on future cargo volumes. • Strengthen Relations with Local Port Authorities and Administration - The Transportation Commission and TxDOT’s staff are currently entering into a new era of coordination and collaboration with Texas port authorities. To advance these relationships, TxDOT must understand the port authorities’ autonomy, their need to remain profitable, and their unique competitive position, which includes intrastate competition. • Pursue Further Study of Critical Maritime Issues – While this report discusses a number of issues that are important to Texas ports, future topics for study include: detailed maritime trade analyses at the regional, country, or commodity level; opportunities for Public-Private Partnerships; and continued monitoring of critical macroeconomic and maritime industry trends.

SECTION 1 PURPOSE OF THE REPORT AND AN OVERVIEW OF TEXAS PORT FACILITIES

Texas ports are the state’s gateways to the world. The state’s port system moves many of the products we sell and the goods we buy to sustain and grow our economy. The impact of Texas ports is felt far beyond the Gulf Coast region. This is because Texas ports serve a myriad of economic activities, from energy exploration and production to manufacturing to agriculture to warehousing and distribution. These activities reach into every corner of the state from the largest metropolitan economies to the smallest Texas towns and rural areas and even to the individual household. Through Texas ports we ship the crops we grow, the products we manufacture, the food we eat, the energy we need for our vehicles, and countless other essential items we consume at home or use in business. Our ports are important investments that require ongoing maintenance and, as demand dictates, expansion. Despite their importance, Texas ports have maintained a relatively low-profile at the state level, because they have historically addressed their needs at the local level. However, as economic competition intensifies, many states are taking a more proactive role in supporting and positioning their ports to attract new industry. The purpose of this report is to familiarize the members and staff of the Texas Transportation Commission with the member ports of the Texas Ports Association (TPA). This report’s content should assist readers with developing a baseline understanding of the volume and types of maritime cargoes being handled at Texas ports, the ports’ existing infrastructure, and the current needs and concerns among port administrators. The report will also briefly review port funding mechanisms that are being utilized by other states in the Gulf of Mexico, as well as the State of Texas’s current approach.

While the membership of the TPA represents almost the entire volume of commercial maritime cargo handled at Texas’s public ports, it should also be noted that a large volume of Texas’s maritime cargo (primarily liquid bulk) is handled at the state’s private terminals. These private terminals play a significant role in Texas’s maritime industry and have a symbiotic relationship with the public ports. One way in which private terminals contribute directly to public ports is by providing revenue for their share of channel maintenance and dredging. This private sector contribution reduces the overall burden of these activities on the public ports. Another way private terminals assist is by generating significant activity in the Texas maritime industry. As a result, Texas’s maritime industry has reached a scale where it can handle essentially every customer need that arises, which has attracted the interest of employers, shippers, and carriers from around the world. While, the state’s public ports are the focus of attention within this report (with the exception of the Port of Texas City), TxDOT will continue to monitor, engage, and collaborate with the state’s private terminals as necessary. The role of private-sector maritime terminals in the Texas economy cannot be overstated.

The data for this report were gathered during a series of visits to member ports of the TPA between the fall of 2013 and the spring of 2014 by Texas Transportation Commissioner Jeff Moseley and staff from TxDOT’s Maritime Division. In addition to visiting Texas ports, TxDOT staff and Commissioner Moseley visited other maritime stakeholders on each tour in order to get a comprehensive view of the Texas maritime system. These stakeholders included the U.S. Army Corps of Engineers (USACE), the U.S. Coast Guard (USCG), county judges, city council members, and industry representatives.

The first port visit of the tour was Port Freeport, which included a tour of the Brazos River Floodgates, led by staff from the USACE. The Brazos River Floodgates represent a challenging intersection along the GIWW due to the narrow width of the gates, the angle of alignment with the river, and a lack of mooring facilities that provide a safe point for barges to tie off. These issues will be further explained in TxDOT’s GIWW Master Plan and Technical Report, which will be released during the summer of 2014.

The ports included in this report also serve as the non-federal sponsor of their respective ship channels, with the exception of the Ports of Beaumont, Port Arthur and Orange. The Sabine Neches Navigation District (SNND) serves as the non-federal sponsor of the channels for these ports and the Sabine Neches Waterway. The tour included a visit with the SNND and a detailed tour of the 64-mile waterway that connects the three ports.

Additional information was gathered from questionnaires distributed by TxDOT to TPA members, along with TPA members responding to other data requests from TxDOT. Supplemental sources of information included trade data from the USACE and the U.S. Maritime Administration (MARAD), as well as data from each port’s website and the TPA’s website. This report was prepared with the assistance of the Center for Economic Development and Research at the University of North Texas.

CLASSIFICATION OF TEXAS PORTS The infrastructure characteristics of Texas ports differ widely based upon their geography, the economic characteristics of the market they serve, and their leadership’s historic decisions and investments. Therefore, the uniqueness of each Texas port makes it difficult to classify them, but some generalized groupings are helpful for understanding their roles in supporting the Texas economy. The tables found on Pages 13 and 14 provide an overview of Texas ports and the sections below give a brief description of each field in the table:

1. Categorization – The most common categorization of ports is related to channel depth. Ports that are served by a channel of 39 feet or deeper are termed “deep draft” ports, ports served by a channel 25 to 38 feet deep are categorized as “medium draft”, and those with a channel depth that is less than 25 feet are called

“shallow draft” ports. Generally, deep and medium draft ports handle both ocean- going and inland vessels (such as barges and tugs, etc.), while shallow draft ports are usually limited to inland vessels or offshore supply ships. In this document, we have created two other classifications. The first classification is based upon the volume of tonnage handled, with the ports divided into three groupings:

• Small – Up to 1,000,000 tons annually • Medium – 1,000,000 to 10,000,000 tons annually • Large – More than 10,000,000 tons annually

The second classification groups the ports according to the array of cargo handled. Ports that regularly handle a large variety of cargoes (e.g. breakbulk, dry bulk, intermodal (i.e. containerized), liquid bulk, roll on/roll off (RO/RO), etc.) are called “comprehensive”. Examples of a comprehensive port are the Port of Houston, the Port of Corpus Christi, and the Port of Beaumont. Ports that handle a smaller variety of cargoes, but usually in high volumes, are called “specialized” ports. An example of a “specialized” port would be the Port of Texas City, which almost exclusively handles very large volumes of liquid bulk cargoes. Similarly, the Calhoun Port Authority could be categorized as a specialized port, since it almost exclusively handles petroleum, chemicals, and bauxite. “Niche” ports handle a few cargo or vessel types and do not generally move large volumes of cargo. The Port of Palacios is one example of a niche port. It handles very little commercial cargo, but it is the home port of a large shrimping fleet and a tugboat and barge builder. The Port of Port Isabel is another example a niche port. Although it is a medium draft port, the Port of Port Isabel, primarily serves offshore supply ships and handles building materials. The final classification in this field summarizes the types of cargo handled at each port: breakbulk, dry bulk, liquid bulk, intermodal containers, offshore servicing, and fishing and shrimping.

2. Tonnage Handled – The estimated annual tonnage handled at each port in short tons (i.e. 1 ton = 2,000 lbs.). It is important to note that the volume handled at an individual port often differs from federal maritime trade statistics, which often provide aggregated data for multiple public ports and private terminals as a single U.S. Customs port. U.S. Customs ports are geographical districts established under U.S. Customs Regulations to identify where goods enter and leave the United States.1 While a Customs port may have a name such as “Galveston” the area within the Customs port extends beyond just the Port of Galveston. Typically, many private terminals are also included in this geographic area. U.S. Customs districts are aggregations of U.S. Customs ports.

1 U.S. Customs districts and ports are listed by name and code in Schedule D, Classification of U.S. Customs Districts and Ports for Foreign Trade Statistics. The geographic limits of each Customs district are published in the U.S. Customs Regulations.

3. Channel Draft – The average, low-tide depth of the main ship channel serving a port is the channel draft. Auxiliary ship channels will often have shallower drafts. Because ship channels along the Texas coastline are constantly filling in with sand from the seafloor, the actual depth along the entire channel is constantly in flux and uneven. The natural process of sand flowing into the channel is often referred to in the port industry as “shoaling” and the practice of removing the sand is called “dredging”. The dredging of federally maintained ship channels in Texas, as well as the dredging of the GIWW, is performed by the USACE.

4. Ownership – With the exception of the Ports of Texas City and Galveston, all ports in the TPA are public navigation districts of the State of Texas. The Port of Galveston is publicly-owned by the City of Galveston, while the Port of Texas City is private and jointly owned by the Union Pacific Railroad and the BNSF Railroad. Texas’s private terminals are owned by a multitude of firms.

5. Estimated Annual Economic Impact – The estimated annual economic impacts of a port’s activities are significantly driven by the assumptions used when preparing the analysis. For example, in some cases, the economic impacts represent only the activities that occur within a port’s gates, while in other instances, the values represent the impact of the entire maritime industry within a region, including private terminals. Therefore, readers should be cautioned against comparing the figures of one port against another, without being familiar with the full range of assumptions that were made during each study (information that is not provided in this report). It should also be noted that the estimates of economic impacts were not prepared as part of this study and, in most cases, the economic impact studies were sponsored by the port.

6. Specialties – The final column of the table lists the primary cargoes handled at each port or other significant maritime activities.

Overview of Texas Ports in the TPA

Tonnage Channel Estimated Annual Port Categorization Ownership Specialties Handled† Draft Economic Impact‡

Port of Orange MD, S, N, BB 94,504x 30 Public $1,900,000g Paper products, lay berthing, vessel construction and repair. Port of Beaumont D, M, C, BB, DB 3,080,231b 40 Public $122,000,000f Military equipment, forest products, steel, bulk grain, crude oil, project cargo, potash, and aggregate Port of Port Arthur D, SM, SP, BB 341,751e 40 Public $128,000,000f Forest products, iron and steel, dry bulk, bagged and bailed cargoes, military cargo, and project cargo. Port of Texas City D, L, SP, LB 78,000,000x 45 Private $919,500,000g Crude oil, refined petroleum products, and chemicals

Port of Galveston D, M, C, CR, DB, 4,786,576d 45 Public $3,060,700,000e Cruise ships, bulk grains, windmills, fresh BB, IM fruits, livestock, machinery, vehicles, paper products, agricultural equipment, liquid bulk, and project cargo.

Port of Houston D, L, C, IM, BB, 35,825,450a 45 Public $178,504,000,000e Consumer goods, plastics, iron and steel, DB, LB, CR iron/steel products, fertilizers, beverages, cereals and cereal products, stone, plaster, cement, vehicles, etc.

Port Freeport D, M, C, DB, BB, 24,537,964ᵇ 45 Public $17,944,500,000e Project cargo, clothing, fresh fruits and IM vegetables, rice, paper goods, plastic resins, aggregate, autos, windmill components. Categorization Key: D = Deep draft; MD = Medium draft; S = Shallow draft; SM = Small, M = Medium; L = Large; C = Comprehensive; SP = Specialized; N = Niche; BB = Breakbulk; DB = Dry Bulk; LB = Liquid Bulk; IM = Intermodal Containers; CR = Cruise; OF = Offshore Servicing; FS = Fishing and Shrimping † Only includes tonnage handled at the port. Does not include nearby, unaffiliated facilities, such as private terminals. ‡ May include economic impacts from nearby, unaffiliated terminals. Note: Dates: a Calendar Year (CY) 2013; b Fiscal Year (FY) 2013; c CY 2012; d FY2012; e CY 2011; f CY 2005; g CY 2004; x year not available.

5 6

Overview of Texas Ports in the TPA (Continued)

Tonnage Channel Estimated Annual Port Categorization Ownership Specialties Handled† Draft Economic Impact‡

Port of Palacios S, SM, N, FS 0 12 Public $41,223,913h Shrimping, vessel construction and repair

Calhoun Port Authority MD, M, SP, LB, 4,572,765d 36 Public $7,000,000,000g Liquid and dry bulk chemicals, fertilizers, DB petroleum products, and bauxite

Port of Victoria S, SM, SP, LB, 5,288,199x 12 Public $6,600,000,000e Chemicals, grains, rice, cotton, liquid and DB dry fertilizers, sand, and gravel Port of West Calhoun S, SM, N N/A 12 Public N/A N/A

Port of Corpus Christi D, L, C, LB, DB, 89,454,480a 45 Public $13,120,800,000e Crude oil, fuels and other petroleum BB products, bauxite, alumina, dry bulk, grain, chemical, breakbulk, and military cargoes.

Port of Port Mansfield S, SM, N 5,230e 3 Public $11,324,814f Recreational fishing, scrap metal

Port of Harlingen S, SM, N, DB, 900,000x 12 Public $19,349,446f Liquid fertilizer, sand, aggregates, fuel, LB raw sugar, cotton, sorghum, and corn.

Port of Port Isabel MD, S, N, DB, 50,000x 36 Public $85,600,000f Offshore servicing, concrete, sand, and OF aggregate

Port of Brownsville D, M, SP, BB, 5,536,689c 42 Public $2,024,900,000e Steel, fuels, waxes, lubricants, limestone, DB, LB, OF, FS asphalt, minerals, grains, bauxite, scrap metal, electrical poles, windmill components, etc. Categorization Key: D = Deep draft; MD = Medium draft; S = Shallow draft; SM = Small, M = Medium; L = Large; C = Comprehensive; SP = Specialized; N = Niche; BB = Breakbulk; DB = Dry Bulk; LB = Liquid Bulk; IM = Intermodal Containers; CR = Cruise; OF = Offshore Servicing; FS = Fishing and Shrimping † Only includes tonnage handled at the port. Does not include nearby, unaffiliated facilities, such as private terminals. ‡ May include economic impacts from nearby, unaffiliated terminals. Note: Dates: a Calendar Year (CY) 2013; b Fiscal Year (FY) 2013; c CY 2012; d FY2012; e CY 2011; f CY 2005; g CY 2011; x year not available Note: Port Mansfield did not handle any commercial cargo between 2007 and 2010; N/A denotes data not provided or available.

REMAINDER OF THE REPORT The next section of this report provides an overview of a port asset matrix (i.e. a summary table), which will help readers understand the capabilities, infrastructure, and equipment present at each port. Section 3 summarizes findings of returned questionnaires from TPA membership. Section 4 provides a brief overview of Texas port finance options, including a survey of the port finance activities of other states along the Gulf of Mexico. Finally, Section 5 offers a list of topics for future consideration by the Commission. The appendices of this report provide an overview of the major macroeconomic trends or factors that are currently influencing activities at Texas ports, along with a state-level analysis of Texas’s maritime trade flows, as they relate to tonnage, commodities, and trading partners.

SECTION 2 PORT ASSET MATRIX

With 11 deep draft ports and several shallow water ports that handle commercial cargo, Texas’s port infrastructure is geographically dispersed, significant in scale, and tailored to the needs of its customers. To better inform the members of the Commission on the characteristics of Texas ports, this section will provide an infrastructure inventory of TPA members. The original asset matrix created for this high level overview became so extensive that it was divided into eight components so it would be more easily understood. The eight components of the asset matrix are: terminal assets, navigational assets, highway assets, rail assets, intermodal assets2, cargo handling assets, storage assets, and market assets. The sections below will give a collective overview of the assets at Texas ports and the accompanying tables will provide specific information for each port, according to the criteria inventoried.

TERMINAL ASSETS As discussed in Section 1, there is a great deal of diversity among Texas ports, in terms of the tonnage and the types of cargo handled. Most of the waterborne cargo that moves through Texas ports is liquid bulk material, which is primarily handled at private terminals that lie outside of the publicly-owned facilities (but rely upon channels maintained by the public ports and the USACE). However, there are some notable exceptions to this observation, such as the Port of Corpus Christi and the Calhoun Port Authority. Usually, these privately-owned terminals connect directly to refineries or petrochemical plants and require relatively little terminal infrastructure and space, compared to dry cargo terminals. The majority of the state’s public port infrastructure, however, concentrates on dry cargoes, in the forms of dry bulk, breakbulk, project cargo, military equipment, intermodal containers, and RO/RO. Terminal assets at Texas ports were inventoried under five categories: dry bulk docks (which also include RO/RO and project cargo docks), liquid bulk docks, container docks, cruise ship docks, and the total linear feet of berthing space.

Among the Texas ports, the Port of Houston has the largest number of dry cargo facilities followed by the Ports of Galveston and Brownsville. It is interesting to note that though the Port of Port Arthur often handles a significant volume of dry bulk and project cargo, it only has five dry cargo facilities.

The Port of Texas City, the state’s only privately-owned port, is also the state’s largest liquid bulk port, followed by the Port of Corpus Christi, which serves adjacent petroleum refineries and petrochemical facilities. Within the entire port facility, the Port of Corpus Christi has 12

2 Throughout this report, the use of the term “intermodal” refers to containerized cargoes that can be easily transferred between modes.

liquid bulk docks. The Calhoun Port Authority serves petrochemical facilities near the port and further afield through a local pipeline network while the Port of Brownsville handles various fuels and lubricants with its liquid bulk docks. Despite its vast size and the immense petrochemical industry along the Houston Ship Channel, the Port of Houston has only one liquid bulk dock. The many visible liquid bulk terminals along the Houston Ship Channel are privately-owned.

There are three Texas ports that regularly handle intermodal containers: the Ports of Houston, Freeport, and Galveston. The Ports of Freeport and Galveston receive containerized cargo via regularly scheduled refrigerated produce carriers. The Port of Houston receives scheduled calls from containerships operated by various domestic and international carriers. At a smaller scale, the Port of Orange recently completed a facility for handling containers-on-barge (COB) and the Port of Brownsville has handled COB in the past, but neither port has a regularly scheduled service at present. The intermodal assets at Texas ports will be discussed in greater detail, later within this chapter.

Three Texas ports have cruise ship docks, (as of June 2014) the Port of Galveston has served as a home port for ships from Carnival Cruise Lines since 2000 and for Royal Caribbean cruise lines since 2002. The Port of Houston, which built its cruise terminal near its Bayport container facility in 2008, began servicing its first cruise ships from the Princess Cruise Line during fall 2013. During 2014, the Port of Houston will also become a home port for the Norwegian Cruise Line. The Port of Corpus Christi’s cruise terminal, built in 2000 to attract a service, has since been repurposed into a successful event center.

Although the total linear feet of berth space is not directly correlated with the amount of cargo handled at each port, it is somewhat indicative for dry cargoes. As would be expected the Port of Houston has the greatest amount of berth space followed by the Ports of Corpus Christi and Galveston. Smaller shallow draft ports, like the Ports of Victoria and Harlingen, have much shorter linear berth lengths due to their handling of GIWW barges that are smaller length overall (LOA).

Terminal Assets at Texas Ports

Dry cargo Liquid bulk Container Cruise ship Total linear feet Terminal Assets docks docks docks docks of berths

Port of Orange 5 -- 1ab -- 2,725

Port of Beaumont 10 1 -- -- 7,829

Port of Port Arthur 5 ------3,102

Port of Texas City 1 21 -- -- N/A

Port of Galveston 11 1 1 3 11,832

Port of Houston 47 1 12 1 35,964

Port Freeport 6 -- 1 -- 2,800

Port of Palacios 2 ------N/A

Calhoun Port Authority 3 9 -- -- 3,301

Port of Victoria 1 1 -- -- 1,150

Port of West Calhoun 1 1 -- -- N/A

Port of Corpus Christi 9 12 -- 1b 14,761

Port of Port Mansfield 1 1 -- -- 2,000

Port of Harlingen 6 1 -- -- 1,000

Port of Port Isabel 3 1 -- -- 2,250

Port of Brownsville 13 5 -- -- 5,685 a Container-on-barge; b The port was not providing this service when this document was being prepared (June 2014). Note: N/A denotes no data available or provided

NAVIGATIONAL ASSETS The navigational attributes of ports have become increasingly critical to their real and perceived viability. The importance of navigability has been especially influenced by falling federal expenditures for channel maintenance dredging and growing ship size, starting in the late-1990s. The announcement of the Panama Canal expansion has also caused the leadership of many ports to question if they have sufficient channel draft. To serve a fully- loaded post-Panamax containership (i.e. a ship that is too large for the current set of locks) a port needs to have a channel depth of at least 50 feet (the ship’s air draft can also be an issue). At present, the deepest ship channels in Texas are 45 feet, which serve the Ports of Houston, Galveston, Texas City, Freeport, and Corpus Christi. The shallow draft ports of Palacios, Victoria, and Harlingen have 12-foot drafts. The Port of Port Mansfield, which has not received maintenance dredging from the USACE for a number of years due to its lack of commercial cargo and commercial cargo tonnage, currently, has about a 3-foot draft which limits its use to small recreational boats.

Channel width varies by port and those with a deeper channel do not necessarily have more width. The key element to channel width is that there is sufficient capacity for the amount of ship traffic on the channel, including the ability of vessels to pass each other safely. In the case of the Houston Ship Channel, there are also “barge shelves”, which are shallower channels adjacent to and on either side of the main channel. The barge shelves allow the slower moving barge traffic to operate freely, while the main ship channel is open to handle the larger and faster ocean-going vessels that call on the various terminals.

Most Texas ports have unlimited air draft, which means their ship channel does not have an overhead obstruction, such as a bridge or power lines. A port’s air draft is relevant if overhead obstructions prevent a vessel from calling on a terminal. Currently, five deep draft ports have air draft limitations. Following the planned replacement of the Harbor Bridge, the air draft of the Corpus Christi ship channel will be approximately 200 feet. Even the shallow draft Ports of Harlingen and Victoria can be limited by the size of tugs and small vessels that can call on those two ports, just like the larger ports, due to bridge height.

As with channel width, the width of the turning basin is significant if it is insufficient to handle the dimensions of the ships that want to call on the port. Larger ports may have several turning basins, so that vessels can be turned quickly and depart.

A port’s distance to sea can be a factor in its competitiveness. Ports that require long transits between the entrance of its ship channel and the port are generally more expensive to call on because of the longer steaming times. However, many cargoes handled at Texas ports are tied to specific markets or facilities and so longer steaming times may not influence the port of call. Additionally, if the ship’s cargo must be drayed to its final destination and the port is closer, the marginal cost per mile is lower for cargo on a piloted

ship than the same cargo hauled by a truck. Therefore, a port’s distance from sea may influence where it is landed in some cases and in others may have little or no influence.

Navigational Assets at Texas Ports

Channel Channel Turning basin Distance to blue-water Navigation Assets Air Draft (ft.) Depth (ft.) Width (ft.) width (ft.) (statute miles)

Port of Orange 30 200 136 700 30

Port of Beaumont 40 400 136 1,100 40

Port of Port Arthur 40 450 136 900 19

Port of Texas City 45 1,200 Unlimited 1,000 27

Port of Galveston 45 1,200 Unlimited 1,400 9

Port of Houston 45 530 135-Unlimiteda N/A 61

Port Freeport 45 400 Unlimited 1,190 8

Port of Palacios 12 125 Unlimited 1,200 14

Calhoun Port Authority 36 200 Unlimited 1,000 26

Port of Victoria 12 125 50 1,410 35+

Port of West Calhoun 12 N/A N/A N/A N/A

Port of Corpus Christi 45 300 137.5 1,200 35

Port of Port Mansfield 3 125 Unlimited 350 9+

Port of Harlingen 12 125 73 1,200 25+

Port of Port Isabel 36 200 Unlimited 1,000 6

Port of Brownsville 42 250 Unlimited 1,200 21

a Air draft restrictions at the Port of Houston vary according to terminal. For example, the Port of Houston’s Barbours Cut and Bayport terminals have unlimited air draft, while the Port of Houston’s Turning Basin Terminal has an air draft of 135 feet. Note: A “statute” mile is the typical measurement of a mile on land, which is 5,280 feet. A nautical mile is 6,075 feet. Note: Ports with a distance to sea followed by a plus sign denotes shallow draft channels that end at the GIWW and are bordered to the east by a barrier island. Note: N/A denotes no data available or provided.

HIGHWAY ASSETS Landside access, particularly roadway access, is critical for many ports. Since the market area for most ports is local, trucks are the only reasonable transportation mode to move many goods between the port and their origin or destination. Even in the best case, the local movement of cargo by truck (called a “drayage” trip) is the most expensive part of any shipment proportional to the distance travelled. Ports located in regions with significant traffic congestion make truck drayage trips even more expensive. Roadway congestion often occurs on the local roads that connect a port to the local transportation network, particularly around a port’s entry gates, where trucks and their drivers wait in lines to enter, submit paperwork, and pass through inspection points. Collectively, the bottlenecks often found closest to a port are referred to as “last mile” issues. Some frequently observed last mile issues around ports include inadequate roadway capacity (especially for heavy volumes of commercial traffic), deteriorated and uneven pavement surfaces, inadequate turning radii, poor traffic signalization, and insufficient signage or markings.

Most Texas ports are located within five miles of a four-lane highway. The only deep water port in Texas that is not within five miles of a four-lane highway is the Calhoun Port Authority. There are two other deep draft ports that are not within one mile of a four-lane highway, which are the Ports of Orange and Port Arthur. Several of the shallow draft ports are not within five miles of a four-lane highway. Most of Texas’s deep and medium draft ports are within one or five miles of a U.S. interstate highway. The exceptions are the Ports of Port Arthur, Freeport, the Calhoun Port Authority, and Port Isabel. The Port of Port Arthur is a U.S. Strategic Port and handles a large volume of bulk and project cargo that moves by truck. Port Freeport is Texas’s second largest container port and handles a large amount of project cargo that travels by truck. Both ports would benefit from closer proximity to a controlled access freeway connecting them to the U.S. interstate system. None of Texas’s shallow draft ports is within five miles of a U.S. interstate highway.

Regardless of location, Texas ports may be served by roadway infrastructure that needs additional improvements to meet existing demand and to minimize or eliminate safety hazards. In urban areas, congestion created by passenger vehicles complicates the operating environment for commercial vehicles and additional capacity or the separation of vehicles is desirable to improve safety and traffic flow.

There are also locations where port users need overweight corridors to move heavy loads or to reduce the number of truck trips. To date, the Texas Legislature has established four oversized/overweight corridors to serve ports.3 These corridors have been established to serve the Ports of Corpus Christi, Brownsville, Freeport, and Victoria. Once a corridor is enacted by the Legislature and signed by the Governor, the Texas Transportation

3 These corridors can be found in Chapter 623 of the Texas Transportation Code.

Commission prepares a written agreement with the sponsoring local agency. The agreement is based upon prior discussions between TxDOT and the local agency to determine the location of the corridor, the permit fee amount, etc. Under these agreements, the local agency issues the oversize/overweight permits to users and collects fees to cover the maintenance cost of the corridor, since overweight trucks wear pavement more quickly. Importantly, the local agency (i.e. the port) takes full responsibility for the corridor’s maintenance. If the oversize/overweight permit fees are inadequate to cover the additional maintenance costs, the port must make up the difference. Therefore, the most logical locations for oversize/overweight corridors are roadway segments where there would be sufficient volumes of permitted loads to fully cover the additional maintenance costs. Once the administrative rules of the corridor are adopted by the Texas Transportation Commission, the agreement is signed.

The oversize/overweight commercial vehicle corridor connecting the Port of Brownsville to bridges on the Texas-Mexico border provides a good example of how these tools can be effectively used by ports. The Port of Brownsville plays an important role in Mexican manufacturing as the port of entry for steel ingots, bars, rolled steel, etc. Commercial trucks can purchase an oversize/overweight permit to carry cargoes from the Port of Brownsville to the Gateway International Bridge (via SH 48/SH 4) and the Veterans International Bridge at Los Tomates (via US 77/US 83 and SH 48/SH 4). These permits allow trucks up to the legal weight limit for Mexican trucks, which is 125,000 pounds. Dimensionally, the combined vehicle and load cannot exceed 12 feet in width, 15.5 feet in height, and 110 feet in length.

Finally, improved roadway access to ports can provide opportunities for land development and local economic development, if they provide access to land that was previously inaccessible to the port. For example, the recently constructed SH 550 in Cameron County provides access to undeveloped land owned by the Port Brownsville that can be used for future development opportunities.

In short, the importance of roadway infrastructure to ports cannot be overstated and there are many desired roadway improvements among the ports. Supporting landside highway infrastructure needs is TxDOT’s most effective and direct manner for assisting Texas ports and it is also a mechanism that is most closely aligned with the agency’s current statutory and constitutional limitations on spending.

Highway Assets at Texas Ports

Within 1 mile of Within 5 miles of Within 1 mile of a controlled Within 5 miles of controlled Oversize/Overweight Highway Assets 4-lane highway 4-lane highway access roadway access roadway Corridor

Port of Orange -- X -- X --

Port of Beaumont X X X X --

Port of Port Arthur -- X -- X --

Port of Texas City X X X X --

Port of Galveston X X X X --

Port of Houston X X X X --

Port Freeport X X -- -- X

Port of Palacios ------

Calhoun Port Authority ------

Port of Victoria -- X -- -- X

Port of West Calhoun ------

Port of Corpus Christi X X X X X

Port of Port Mansfield ------

Port of Harlingen X X ------

Port of Port Isabel X X ------

Port of Brownsville X X X X X

RAIL ASSETS Landside access to rail is a significant component of Texas’s freight transportation network. With the exception of the Port of Port Isabel, all of Texas’s deep water ports have access to rail. Among the three shallow draft ports reviewed in this report, only the Ports of Victoria and Harlingen had access to rail. Most Texas ports with rail access are served by more than one Class I railroad. Receiving service from more than one Class I railroad within the port is desirable, since rail rates may be lower than those ports without competition. Notably, the Port of Port Arthur and Port Freeport are the only two deep water ports that are served by one carrier (Kansas City Southern and Union Pacific, respectively). It should also be noted that agreements between the railroads usually allow rail cars to be interchanged between Class 1 railroads, if it is necessary for the cargo to reach its final destination.

Many Texas ports are served by port terminal railroads, which have the responsibility of interfacing with the Class I railroads. Port terminal railroads are common carriers which ensure that trains are interchanged efficiently between the terminals and the Class I railroads and that all users are treated fairly. The most extensive port terminal railroad is the Port Terminal Railroad Association (PTRA) that operates along the Houston Ship Channel. The PTRA serves more than 220 customers from seven rail yards and maintains 154 miles of track and 20 bridges.4 It was first formed in 1924 and is owned and operated by the Port of Houston Authority and the three Class I railroads. The Port of Brownsville’s terminal railroad is called the Brownsville & Rio Grande International Railroad and it serves port traffic, as well as interchanges with the Kansas City Southern Mexico Railroad at the Brownsville & International Matamoros Bridge. Not all port terminal railroads are operated fully or partially by their port. Two of the port terminal railroads (the Corpus Christi Terminal Railroad, the Galveston Railroad) are owned and operated by the private firm Genesee & Wyoming, Inc. The Calhoun Port Authority is the only port switched by a short line railroad, the Point Comfort and Northern Railroad, which is also owned by Genesee & Wyoming. The Port of Orange Terminal Railway switches for the Port of Orange. The Port of Beaumont does not have terminal railroad, but uses Trans-Global Solutions, Inc. as an industrial switching contractor.

Many Texas ports are located within a rail district, which were created by the Texas Legislature to help local governments prevent railway abandonments or to invest in rail infrastructure for economic development purposes. Rural Rail Transportation Districts have the ability to sell bonds, collect usage fees, and exercise eminent domain, but they do not have taxing authority. The Gulf Coast Rail District (GCRD), which does not meet the criteria of a Rural Rail District, was formed by Harris County, the City of Houston, and Fort Bend County under authority granted by the Texas Legislature. Efforts by the GCRD to address rail congestion in the Houston region provide indirect benefits to all the ports in and around its

4 A rail yard is a system of tracks where trains can organize cars without regard to a schedule (Armstrong, 1998). Rail yards usually consist of a series of parallel tracks and switches.

jurisdiction by dealing with issues that create inefficiencies throughout the regional rail network.

Texas Ports Located in Rail Districts

Port Jurisdiction

Port of Texas City Galveston County Rural Rail District

Port of Galveston Galveston County Rural Rail District

Port of Houston Gulf Coast Rail District

Port Freeport Gulf Link Rural Rail District Calhoun County Rural Rail District/ Calhoun Port Authority Gulf Coast Rural Rail District

Port of West Calhoun Calhoun County Rural Rail District Nueces County Rural Rail District/ Port of Corpus Christi San Patricio Rural Rail District Source: TxDOT, 2013.

Most of Texas’s larger ports that handle bulk materials have the ability to work a unit train within the port. However, Port Freeport and the Calhoun Port Authority are exceptions. The Port of Texas City, which is jointly owned by the UP and the BNSF can access rail yards outside of the port for breaking up and forming trains. Two types of rail infrastructure that are useful to ports but not included in the Rail Assets matrix below are rail loops and rail on dock. A rail loop is a rail siding that connects to a main track with connectors on both ends. Rail loops of sufficient length can be used so that one train can move off the main track to allow another train to pass, which increases the efficiency of a track (Jackson, 2006). Rail on dock allows trains to pull alongside a vessel at berth and cargoes can be loaded directly from the ship onto the train and vice-versa. Finally, a number of Texas ports provide storage for rail cars on a fee-basis. This practice allows ports to profit from underutilized rail infrastructure and provides a useful service to rail users.

Rail Assets at Texas Ports

No. of Class I Short Line Terminal Within a Rail Can Handle Unit Rail Car Rail Assets Railroads Railroad Railroad District Train Within Port Storage Port of Orange 2 X X -- X -- Port of Beaumont 3 ------X --

Port of Port Arthur 1 ------X X

Port of Texas City 2 -- X X -- --

Port of Galveston 2 -- X X X X

Port of Houston 3 -- X X X X

Port Freeport 1 -- -- X -- --

Port of Palacios ------X -- --

Calhoun Port Authority 2 X -- X -- --

Port of Victoria 1 ------

Port of West Calhoun ------X -- --

Port of Corpus Christi 3a -- X X X X

Port of Port Mansfield ------

Port of Harlingen 1 ------Port of Port Isabel ------

Port of Brownsville 3ab -- X -- X X

a Union Pacific provides direct service to the port or direct service via a terminal operator. BNSF has trackage rights on Union Pacific track and can also provide service to the port. b The Kansas City Southern de Mexico (KCSM) provides rail service into Mexico from the Port of Brownsville. KCS can only provide direct domestic rail service by traversing Mexico on KCSM track.

INTERMODAL ASSETS The Ports of Houston, Freeport, and Galveston are the three ports in Texas that regularly handle intermodal containers. The table below shows the number of twenty-foot equivalent units (TEUs) handled within each customs district, which may include private terminals outside of the publicly-owned ports. The Houston custom’s district clearly handled the vast majority of Texas’s containers with 95.3 percent of the market share or almost 1.5 million TEUs. It should be noted that MARAD’s figures appear to only account for loaded containers, since the Port of Houston’s estimates for the number of loaded TEUs handled during 2012 aligns relatively close to the figure below. There were more than 440,000 empty TEUs handled at the Port of Houston during 2012 and additional empty containers were handled at Port Freeport and the Port of Galveston.

Number of Loaded TEUs Handled at Texas Maritime Ports, 2012

Rank Customs Port TEUs Share of Total

1 Houston 1,494,516 95.3%

2 Freeport 60,818 3.9%

3 Galveston 12,609 0.8%

Total 1,567,943 100.0% Source: MARAD, 2014.

As would be expected, based upon the volume of TEUs handled, the Port of Houston has the most extensive intermodal container infrastructure in Texas. Between its original Barbours Cut facility and its newer Bayport container terminal, the Port of Houston has 12 berths for containerships, with room for expansion. The Port of Houston also has 26 container cranes and among those, 12 cranes that are of Post-Panamax size (of which three are Super Post- Panamax sized cranes). Port Freeport utilizes a Gottwald Mobile Harbor Crane with an attached device called a “spreader” for lifting and moving intermodal containers. Using this equipment, the port’s workers are adept at moving a significant number of containers per hour. Container vessels calling on Port Freeport may also use shipboard cranes that assist with or handle the loading and unloading. Port Freeport will be receiving two Post-Panamax ship-to-shore cranes in July 2014 and they will be operational by September 2014. The Port of Galveston relies entirely upon shipboard cranes to discharge and load containers at the port.

Each of the three ports maintains storage and marshalling yards within the port. The Port of Houston has large storage and marshalling yards at both of its container facilities. Within these yards, containers are received, stacked, sorted, and sent out. Rubber tire gantry (RTG) cranes stack and sort the containers within the yard, while yard hustlers (essentially stripped down semi-trucks equipped with an attached chassis) move the containers

between the ships and the RTGs. The yard hustlers may also service the intermodal rail yard within the Port of Houston’s Barbours Cut facility. At that rail yard, containers are often moved using reach stackers, which are a cross between a forklift and a truck-mounted crane with an attached spreader. For origins and destinations outside of the port, full-size semi- trucks bring and pick-up the intermodal containers at the port. Containers that move over the road sit upon a trailer chassis that locks the container in place. At the ports of Freeport and Galveston, containers are not stacked but placed directly onto their trailer chassis. Texas’s container facilities are especially important to TxDOT, since each intermodal container that is not handled at the intermodal rail yard at Barbours Cut, typically generates one or two truck trips.

Finally, in addition to ocean-going vessels, many Texas ports have an interest in servicing barges that carry intermodal containers. Called “Container-on-Barge” (COB), the use of COB has the potential to reduce the number of truck trips carrying goods on Texas highways. Various Texas ports, such as Brownsville, Beaumont, Port Arthur, Orange, and Victoria have been long-time proponents of COB. The Port of Brownsville even hosted a COB service for a short period. The Port of Orange recently completed construction of a facility capable of handling COB and the Port of Victoria started construction of a COB-capable facility during 2013. Nonetheless, despite the potential transportation network, environmental, and cost benefits of COB, many shippers have been reluctant to adopt a service for various reasons including (Kruse and Hutson, 2010):

• The service is not cost-competitive with truck or rail; • Difficulty chartering vessels; and • Under capitalization makes the service unreliable when there is equipment failure.

Another potential problem, that has been previously cited, is the inability of a COB service to maintain shipping schedules.

Intermodal Assets at Texas Ports

Containership Containership Total Container Post-Panamax Wheeled Storage Intermodal Assets service Berths Cranes Cranes Regular/Reefer

Port of Galveston X 1 --a -- Yes/Yes Port of Houston X 12 26 12 Yes/Yes

Port Freeport X 3 3 2b Yes/Yes

a The Port of Galveston uses shipboard cranes to discharge and load the vessel. b Port Freeport anticipates these cranes will be operational September 2014.

CARGO HANDLING ASSETS Given the enormity of the oil refinery and petrochemical complex located along the Texas coastline, it is not surprising that a significant portion of the state’s maritime trade consists of liquid bulk cargoes. In addition to crude oil and chemicals, other liquid bulk cargoes include gasoline, distillates, fertilizers, lubricants, and molasses. As was noted earlier, a large proportion of this liquid bulk cargo is handled at Texas’s privately-owned terminals, although vessels access these private terminals using public shipping channels. In fact, there are no liquid bulk docks at the Ports of Orange, Port Arthur, or Port Freeport. There is only a single liquid bulk dock at the Port of Houston and one other at the Port of Galveston, which again attests to the extensive array of liquid bulk port infrastructure owned and operated by the private sector. The Port of Beaumont has recently added a liquid bulk dock that has equipment for transloading crude oil from rail to barge. The one port with a large complement of liquid bulk facilities (21 liquid bulk docks) is the Port of Texas City and it is privately owned. Moving down to the mid to lower Texas Coast, liquid bulk docks in public ports become more common. The Port of Corpus Christi has 12 liquid bulk docks (as noted earlier) and the Calhoun Port Authority has 9 liquid bulk docks. Some of these ports are able to access local or intrastate/interstate pipeline networks.

All Texas ports have facilities to handle dry bulk materials. With the exceptions of shallow draft ports and the Port of Texas City and the Calhoun Port Authority, all Texas ports have heavy-lift cranes that can be used to move bulk goods and project cargo (e.g. large vehicles, electrical generators, oil field equipment, etc.). Some shallow draft ports are equipped with automated belt conveyor systems for handling bulk materials. Many Texas ports also have RO/RO ramps, which are used to load or discharge vessels loaded with any wheeled cargo from automobiles to farm equipment to military tanks. There have even been ferry services to Mexico and Central America that have operated from Texas ports, but these services are no longer in service.

Cargo Handling Assets at Texas Ports

Access to Liquid bulk handling Access to local Heavy lift Roll On/Roll Terminal Assets intrastate/interstate equipment pipeline network cranes Off ramp pipeline network

Port of Orange ------

Port of Beaumont X -- -- X X

Port of Port Arthur ------X X

Port of Texas City X X X -- --

Port of Galveston X - - X X

Port of Houston X X X X X

Port Freeport -- X X X --

Port of Palacios ------

Calhoun Port Authority X -- X -- X

Port of Victoria X X ------

Port of West Calhoun X X ------

Port of Corpus Christi X X X X X

Port of Port Mansfield ------

Port of Harlingen X X ------

Port of Port Isabel ------X X

Port of Brownsville X N/A N/A X -- Note: N/A denotes data not provided or available.

STORAGE ASSETS Outdoor storage areas are an important part of a port’s operations, not only for the staging and marshalling of the cargoes loaded or unloaded from the ship, but also because many port customers use the port as a short-term warehouse. Ports have a combination of paved and unpaved areas that are assigned for storage. Paved areas are often concrete and are capable of handling heavy loads, like project cargo (e.g. power plant generators, oil field equipment, etc.). Unpaved storage areas are land usually improved with a road base so that the surface can handle both the weight of the cargo and the moving equipment.

Six Texas ports have elevators and four of those are for public use. The Port of Beaumont’s elevator is leased and not available for public use and the elevator within Port Freeport is owned by a tenant and used for rice. Grain elevators at Texas ports are capable of rapidly handling large volumes of agricultural commodities. Most facilities can handle cargoes dropped into ground hoppers from trucks or rail cars, which are then conveyed into the elevator. The Port of Houston’s grain elevator has a 6.2 million bushel capacity (leased and operated by Louis Dreyfus, therefore, not available for public use) and it can receive up to 30 trucks per hour and 20 rail cars per hour. Grains can be loaded into the elevator at a rate of 120,000 bushels per hour. The Port of Corpus Christi has the next largest elevator with a capacity of 5.0 million bushels (leased and operated by ADM Growmark). In general, there is a lack of elevator storage capacity at Texas ports, which limits export and import opportunities for producers, customers, and the ports.

Four Texas ports have cold storage facilities. The largest facility is located at the Port of Houston’s CARE terminal and is 200,000 square feet in size. The Port of Corpus Christi built a 100,000 square foot refrigerated warehouse that is capable of cooling down to -10 degrees Fahrenheit. The Port of Galveston has a 65,000 square foot facility that is used for the fresh fruits and vegetables it crossdocks at the port.5 Port Freeport has a 40,000 square foot cool storage facility that is also used for crossdocking bananas, other fresh fruit, and fresh vegetables. In the case of Port Freeport, the refrigerated warehouse is primarily used to protect produce during its transfer from refrigerated containers to refrigerated trucks, rather than being used for longer term storage. Refrigeration units mounted on the truck trailers keep the produce chilled once crossdocking is complete. These units may operate using plug in electricity or with a diesel generator.

Some cargoes require covered storage prior to shipment or after being unloaded from the vessel. These cargoes may be stored temporarily in dockside wharves, transit sheds or longer term in port warehouses. All of Texas’s deep water ports have covered storage. Collectively among its various terminals, the Port of Houston maintains the most space with

5 Cross-docking refers to the unloading of cargoes from refrigerated intermodal containers and placing them in refrigerated van trailers. Cross-docking allows the refrigerated intermodal containers to be returned to the vessel more quickly and reduces the overall number of truck trips.

2,872,900 square feet of transit sheds, wharves, and warehouses followed by the Port of Beaumont. Even some of the state’s shallow draft ports maintain covered storage, such as the Port of Victoria with 24,300 square feet of storage.

Storage Assets at Texas Ports

Paved outdoor Unpaved outdoor Elevator Cold Storage Transit sheds and Storage Assets storage (ac.) storage (ac.) (bushels) (sq. ft.) warehouses (sq. ft.)

Port of Orange 3 15 -- -- 350,000

Port of Be aumont 42 50 3,500,000 -- 620,000

Port of Por t Arthur 17 40 -- -- 518,400

Port of T exas City -- N/A ------

Port of Galveston 23 N/A 3,000,000 65,000 199,530

Port of Houston 359 -- 6,200,000 200,000 2,872,900

Port Freeport 10 81 Unknown 40,000 450,000

Port of Palacios 2 5.5 -- -- N/A

Calhoun Port Authority 0.5 3 -- -- 25,000

Port of Vict oria 3 N/A -- -- 17,000

Port of West Calhoun N/A N/A ------

Port of Corpus Christi 100> N/A 5,000,000 100,000 496,333

Port of Port Mansfield -- N/A ------

Port of Harlingen -- 400 ------

Port of Port Isabel -- 35 -- N/A --

Port of B rownsville N/A 65 3,000,000 -- 571,065

Note: N/A denotes data not provided or available

MARKET ASSETS The next table shows some of the unique market assets of Texas ports, which include designation as a U.S. Military Strategic Port, having a cruise terminal, being located within an air quality attainment area or a Foreign Trade Zone (FTZ), and having developable land for future port expansion or port customers. Each of these attributes is considered desirable and provides additional opportunities for ports to expand their cargo volumes.

Three of Texas’s ports are among the 17 U.S. ports within the National Port Readiness Network. These ports are the Ports of Beaumont, Port Arthur, and Corpus Christi, with largest volume of military cargo in the United States handled at the Port of Beaumont. Stationed at each port are representatives from 10 federal agencies that oversee the secure transport of U.S. military equipment and personnel. These agencies include the U.S. Maritime Administration (MARAD), the USACE, the Surface Deployment and Distribution Command (SDDC - led by the U.S. Army’s 842nd Transportation Battalion), the U.S. Coast Guard (USCG), the Military Sealift Command (MSC), the U.S. Army Forces Command (USFORSCOM), the U.S. Transportation Command (USTRANSCOM), and the U.S. Army Installation Management Command (MARAD, 2014). Most of the military equipment that went through Texas ports during the Iraq War and the War in Afghanistan arrived and departed by rail, unlike the Persian Gulf War when most equipment travelled to and from the ports by truck. Nonetheless, Texas ports handling military cargoes do receive some truck trips related to military deployments. Some Texas ports even receive military cargo by air, such as the Port of Beaumont and the Port of Corpus Christi, where helicopter squadrons have been flown in with multiple helicopters landing simultaneously on the dock, in order to be loaded aboard Large Medium Speed RO/ROs (LMSR). Repatriated and damaged equipment also returns and many of the damaged vehicles are sent to the Red River Army Depot in Texarkana, which specializes in repairing them.

There are two Texas ports with active passenger cruise terminals. The Port of Galveston has been a major departure point for the U.S. cruise industry, serving as home port for cruise ships from the Carnival and Royal Caribbean cruise lines. During 2012, approximately 863,000 cruise ship passengers and crew embarked and debarked from the Port of Galveston6. When the ships turn, a large number of passengers embark and debark the vessel, which generates a significant amount of traffic on roadways surrounding the port. These port calls also generate a large number of commercial vehicles that supply and service the ship. The Port of Houston began hosting Princess Cruises during 2013 and will begin serving the Norwegian Cruise Line from its Bayport Cruise Terminal starting in 2014. According to the Port of Houston, Princess Cruises and the port hosted more than 78,000 passengers during the 2013 Sailing Season.

6 Galveston’s 2012 count of cruise ship passengers reflected an increase over recent years, but was below the 2007 peak, when 1.2 million passengers and crews embarked and debarked at the port. The growing volume suggests that improving economic conditions are encouraging higher passenger volumes.

The availability of a Foreign Trade Zone (FTZ) is a significant factor in the decision making for many firms that are considering relocation to Texas. Texas has 32 designated and approved Foreign-Trade Zones (FTZ). Most Texas ports are located within approved FTZ boundaries. FTZs are geographic areas approved by the federal government and can allow special U.S. Customs and Border Protection (CBP) procedures for importing and exporting goods. Companies that are approved for FTZ designation are able to defer U.S. Customs duties until the cargo enters the commerce of the United States and defer quota charges on goods that are being re-exported. Approved companies can also reduce or defer duties on imported goods. Many companies that manufacture a finished product using imports, with a lower duty rate than the combined duty rate of its components may be approved to pay a reduced duty rate. Some companies may also be able to take advantage of special CBP procedures.

Ports can work with local and state economic development organizations to offer FTZ benefits for prospective companies looking for incentives that will benefit their business. Port Isabel is the only deep-draft port in Texas that is not in an FTZ and the Port of Victoria is the only shallow-draft port (among those discussed in this report) that is within a FTZ (Foreign Trade Zones Board, 2014).

Finally, many of Texas’s port authorities or navigation districts have large amounts of land that could be used for future development, although not all the owned land is necessarily developable. The Brownsville Navigation District is the largest landowner with approximately 40,000 acres followed by the Port of Corpus Christi, which owns 22,000 acres. Many of the ports along the upper Texas Coast have more limited acreage. The Port of Houston has 907 acres of land to develop within its Bayport facility and another 1,100 acres of developable land on Pelican Island. The Port of Galveston has 300 acres on Pelican Island, while the Port of Beaumont owns 600 acres of developable land. Among the shallow draft ports, the Port of Victoria is the most land-rich with 1,800 acres, followed by the Port of Palacios with 729 acres.

Summary of Market Assets for Texas Ports

U.S. Military Operational Within an Air Quality Within a Foreign Available Land for Market Assets Strategic Port Cruise Terminal Attainment Area Trade Zone (FTZ) Development (acres)

Port of Orange -- -- X X 150

Port of Beaumont X -- X X 600

Port of Port Arthur X -- X X 70

Port of Texas City ------X 140

Port of Galveston -- X -- X 300

Port of Houston -- X -- X 2,007

Port Freeport ------X 7,723

Port of Palacios -- -- X -- 729

Calhoun Port Authority -- -- X X 137

Port of Victoria -- -- X X 1,800

Port of West Calhoun -- -- X -- 200

Port of Corpus Christi X -- X X 22,000

Port of Port Mansfield -- -- X -- 9

Port of Harlingen -- -- X -- 150

Port of Port Isabel -- -- X -- 45

Port of Brownsville -- -- X X 40,000

Note: The Hardin, Jefferson, and Orange County airshed, which contains the Ports of Beaumont, Orange, and Port Arthur, was once designated as non- attainment. It is currently considered in “attainment maintenance”, which means that it regularly maintains the same air quality standards as those locations that are within attainment.

CONCLUSIONS Despite their commonalities, Texas ports differ so that no two ports are alike. In fact, Texas port directors emphasize their ports’ uniqueness with the adage, “Once you have been to one Texas port, you have been to one Texas port”. Although Texas’s port network is resource rich, the sustained growth of the state’s economy has placed heavy demands on port infrastructure. Many of the investments made in Texas ports were made decades ago and years of heavy use are taking their toll. Unfortunately, the replacement or expansion of this infrastructure is neither quick nor cheap. It is also important for Texas ports to have the flexibility to diversify their assets, so they may be prepared for future activities. This flexibility allows the ports to adapt to unanticipated market shifts. As an example, the Port of Victoria fortuitously added a liquid dock, prior to the booming activity of the Eagle Ford Shale. As a result, the port was able take advantage of this opportunity and currently handles more than 1 million barrels of crude oil per month. Section 4 will discuss some of the existing and current needs for updating the assets at Texas ports.

SECTION 3 PORT QUESTIONNAIRES

Last year, TxDOT sent a questionnaire to TPA members to better understand the conditions and issues at their port. Specifically, TxDOT’s questions focused on understanding the concerns that each port identifies as hindering its ability to meet its goals, as well as to better understand each port’s strengths and market position. Another key purpose of the questionnaire is to identify opportunities where TxDOT might be able to provide assistance to the ports, particularly as their needs relate to landside issues. To date, TxDOT has received 11 responses with the respondents listed in the table below.

Respondents to TxDOT’s 2014 TPA Questionnaire

TPA Member Response

Port of Orange -- Port of Beaumont X Port of Port Arthur X Port of Texas City -- Port of Galveston -- Port of Houston X Port Freeport X Port of Palacios X Calhoun Port Authority X Port of Victoria X Port of West Calhoun -- Port of Corpus Christi X Port of Port Mansfield -- Port of Harlingen X Port of Port Isabel X Port of Brownsville X

BARRIERS TO GROWTH The first question of the questionnaire focused on issues that were preventing the port from reaching its desired operational performance. The question was stated as:

Question #1: What currently is not working in your port that hinders efficient operations (this could be regulatory, operations/logistics, etc.)?

Generally, the issues reported by the ports could be grouped into four categories: the need to build new port infrastructure to respond to growing demand; the need to replace

infrastructure that is beyond its productive lifespan; the need for maintenance dredging of ship channels and the GIWW or channel deepening or widening; and the need to build or replace landside infrastructure serving the ports. Weaved throughout the discussion of many of the ports’ responses was the need for additional funding sources.

As noted, several ports identified the need to build new infrastructure to respond to growing market demand, improve operational efficiencies, and replace aging infrastructure. The Port of Beaumont identified the need to replace several aged docks, wharves, and cargo handling facilities within the foreseeable future. The Port of Port Arthur is planning a $31 million berth expansion project, but has not identified all the funding sources needed to move forward. The Port of Corpus Christi cited the need for new barge fleeting and mooring areas to meet existing and future demand. At present, barges are waiting as far as 50 miles from their eventual dock assignment, due to the lack of sufficient mooring locations. As the volumes of crude oil, refined petroleum products, and frac sand grow to service the Eagle Ford Shale play, the Port of Corpus Christi expects its problems to worsen. The Port of Brownsville reported the need for a new liquid dock that will cost between $10 and $12 million. The Ports of Port Isabel and Brownsville both reported the need to replace or repair aged dock infrastructure and both ports expressed concerns about funding these projects.

The need for maintenance dredging, channel deepening, or channel widening was frequently cited by the responding ports. The Port of Corpus Christi detailed the need for widening of the Corpus Christi Ship Channel to allow two-way traffic in some areas, as well as deepening the channel so vessels could fully utilize their capacity. Another identified improvement was the dredging of barge shelves along the channel in the Upper and Lower Corpus Christi Bay. Barge shelves, which exist along the Houston Ship Channel, allow barges to operate outside of the main ship channel, leaving it open for larger, ocean-going vessels. The Ports of Houston and Corpus Christi also expressed frustration with the USACE’s regulatory/permitting/planning process for dredging projects. The Port of Corpus Christi stated the difficulties of these processes have limited its ability to respond to private-sector port customers. Furthermore, the USACE was said to be developing new policies/regulations/real estate requirements that will further complicate current and planned dredging projects. The Ports of Harlingen and Brownsville stressed the need to maintain channel depths in the GIWW and their respective channels.

Many ports identified specific highway and rail infrastructure projects that needed funding. The Ports of Beaumont and Port Arthur each identified rail projects that are eligible to be built with Congestion Mitigation & Air Quality Improvement (CMAQ) funds. The Port of Beaumont project is a rail overpass to access its Orange County facility, which will have a major crude oil terminal. The overpass would prevent trains serving the Orange County terminal from conflicting with rail operations on other nearby tracks. The Port Arthur project is a rail reliever that would also be eligible for CMAQ funds. The questionnaire’s

respondents also listed a number of roadway projects that would improve the efficiency of their ports. The Port of Port Arthur identified the need to modify or replace the SH 82 Bridge, which crosses the ship channel serving the Ports of Port Arthur, Beaumont, and Orange. The Port of Corpus Christi identified a number of potential roadway projects. Two of the projects would improve access at the port’s La Quinta terminal, through a reversal of ramps on SH 35 and with a grade separation of US 181 at the La Quinta terminal’s main entrance. A third roadway project identified by the Port of Corpus Christi was the widening of the SH 181 Bridge as it crosses the Rincon Canal. The supports for the current bridge are placed in the canal and prevent the simultaneous passage of two barges. A roadway improvement suggested by the Port of Port Isabel was the construction of a new port access road, which would allow trucks to avoid traversing through an adjacent neighbourhood.

Finally, the Port of Houston identified the lack of funding, to expand the hours of operation for U.S. Customs and Border Protection agents, as an impediment to trade.

Self-Identified Barriers to Growth at Texas Ports

Respondent Response Port of Beaumont 1. Major repair or replacement for several docks, wharves, and other cargo handling facilities. Port of Port Arthur 1. Need funding for rail reliever route through CMAQ program. 2. Funding for local match, if the Water Resource Development Act of 2013 is enacted. 3. Modification or replacement of SH 82 Bridge. 4. Need funding for $31 million berth expansion project. Port of Houston 1. The USACE is receiving an insufficient allocation of funding from Congress to fulfil its mission to maintain authorized channel depths and widths. This situation is affecting the types of vessels that can use the Houston Ship Channel and it also affects how the vessels are loaded. 2. The Port of Houston is using its own funds to deepen and widen federally authorized channels, so that the port can remain competitive in the global marketplace. 3. The USACE is not able to permit dredge material placement areas quickly enough to keep pace with the need to dredge the ship channels. 4. U.S. Customs and Border Protection needs additional resources to operate at night and during weekends to keep up with the flow of commerce.

Self-Identified Barriers to Growth at Texas Ports (Continued)

Respondent Response Port of Freeport 1. Navigational modifications needed before Phase Three of channel deepening can proceed. 2. Single service rail with limited capacity which hinders investing in additional rail infrastructure. Port of Palacios 1. Customer industry conditions and limited customer diversity. Calhoun Port Authority No response. Port of Victoria 1. Add capacity to existing rail spur. Port of Corpus Christi 1. Channel widening to allow two-way traffic in some locations or reduce piloting fees. 2. Channel deepening so vessels can fully utilize their capacity and reduce port calls. 3. Need for barge fleeting areas to serve existing and future traffic. 4. Widen the US 181 channel crossing at the Rincon Canal to permit two-way barge traffic to and from the Rincon Industrial Park. 5. Add barge shelves to ship channel in the upper and lower bay. 6. Difficulties with the regulatory/permitting/planning process with the USACE. 7. SH 35 ramp reversals to serve future SH 35 entrance to La Quinta property. 8. Grade separation of La Quinta Gateway’s primary entrance from US 181 to serve future truck and rail traffic. Port of Harlingen 1. Urgently need maintenance dredging of channel to maintain current barge drafts. Port of Port Isabel 1. Need to upgrade or replace aged dock structures. 2. Improved port access so a port tenant does not have to bring cargo through existing residential neighbourhoods. Port of Brownsville 1. New liquid cargo dock is needed. 2. Dock repairs needed for existing dry bulk and liquid docks. 3. Maintaining channel depths in GIWW and ship channel.

PORT STRENGTHS After identifying their barriers, ports were asked to identify their strengths, responding to the following question:

Question #2: What are your port’s strengths, what is working well?

The ports’ wide-ranging responses reflect the diversity of Texas ports, with regard to the services they offer, their tenants, and their port and channel infrastructure.

Self-Identified Port Strengths

Respondent Response Port of Beaumont 1. Strong and stable management with support from the community and loyal customers. 2. Stable workforce. 3. Diversified client base, without dependence upon any one customer. 4. Recently completed major railroad improvements in the Jefferson County facilities. 5. New rail and roadway improvements at the Orange County facility. 6. Largest military cargo port in the world. Excellent relationship with the U.S. Army Surface Deployment and Distribution Command. Port of Port Arthur 1. One of the most modern breakbulk cargo ports in the Gulf of Mexico. 2. Less than two hours sailing time to the Gulf of Mexico. 3. Located along a section of the Sabine-Neches Waterway with a 40-foot draft, which is also a segment of the GIWW. 4. On-dock rail and service by Kansas City Southern Railroad. 5. RO/RO dock and a U.S. Military Strategic Port. Port of Houston 1. The Port of Houston has become the largest foreign cargo port in the United States and the second largest in overall tonnage. 2. The port’s competitive advantages are its ties to the energy industry’s infrastructure, its proximity to a major population center, and its role as a low-cost link within the supply chain. 3. The Port of Houston has key partnerships with many of the 150 different entities located along the Houston Ship Channel. 4. The Port of Houston has strong relationships with the USACE, which has assisted the port with maintaining and improving the Houston Ship Channel 5. The Port of Houston has a strong partnership with the Class 1 railroads that operate the Port Terminal Rail Association (PTRA). Port of Freeport 1. Ranked 21st port in the U.S. in terms of international trade. 2. New 800’ berth which is currently the deepest operational berth in the gulf at 47’ 3. Purchased two state of the art ZPMC container cranes that are capable of handling Panamax class container ships

Self-Identified Port Strengths (Continued)

Respondent Response Port of Palacios 1. Port is home to Texas’s largest shrimping fleet. While the industry has come under intense pressure, the Palacios fleet has been stable. 2. Home to a successful barge and push boat manufacturing facility. 3. Developing other parts of the port to diversify tenant base. Calhoun Port Authority 1. The port is able to get vessels in and out without them incurring demurrage. Port of Victoria 1. Ability to adapt quickly to customer needs and support customer’s project development needs. Port of Corpus Christi 1. One of the deepest draft ports in the Gulf of Mexico and one of the few in the nation with a draft authorization of 52 feet. 2. Transit time from open water to cargo dock less than three hours and the channel is generally uncongested. 3. Well-maintained and modern waterfront facilities which includes one of the strongest multipurpose docks in the area able to handle large and extra heavy cargo. 4. Ideally positioned to take advantage of the Eagle Ford Shale Play. 5. Available land for future development, such as storage tanks, plants, or waterfront facilities. Port of Harlingen 1. Port is able to efficiently and effectively handle 90 percent of fertilizers and 70 percent of gas products in South Texas. 2. Low operating expense (overhead and staff costs). 3. Good relationship with Navigation District board. Port of Port Isabel 1. Port is able to effectively serve deep and shallow draft vessels and their cargoes. 2. Returning to its previous importance as an off-shore platform service port. 3. RO/RO ferry ramp with a history of ferry service. Port of Brownsville 1. Only deep water port directly on the U.S.-Mexico border. Active in cross- border trade/transhipment. 2. Overweight truck corridor to Mexico. 3. The port has 40,000 acres of developable land.

BETTER UTILIZING THE GIWW The third question posed to the ports related to facilitating the use of the GIWW and was stated as follows:

Question #3: Please describe how the GIWW serves your port, if it all. Are there opportunities for improvement in how the waterway can better serve?

All the responding ports viewed the GIWW as important component of serving their existing customers. The Port of Houston called the GIWW “vital” for its operations, while the Port of Port Isabel called the GIWW “essential” for bringing in new customers. In the case of the shallow water ports, namely the Ports of Victoria, Palacios, and Harlingen, the GIWW is literally “essential”, since none of the ports are connected to the Gulf of Mexico by a ship channel. The Ports of Beaumont and Corpus Christi reported a jump in traffic on the GIWW that has been spurred by the oil and gas industry. In the case of the Port of Beaumont, it has been the shipping of crude oil to refineries in Southeast Texas. For the Port of Corpus Christi, it has been in the form of shipping crude oil from the Eagle Ford Shale play to refineries, shipping locally refined products, and receiving frac sand. Many of the smaller ports receive refined petroleum products from the larger ports, which use the GIWW.

Almost all of the ports identified improvements to the GIWW or maintenance dredging as very important. The most common response emphasized the need to continue maintenance dredging of the GIWW and to bring it down to its authorized depth of 12 feet. One suggestion offered by the Port of Corpus Christi was that TxDOT should work with the USACE to increase the number of dredge placement areas to insure that there will be sufficient capacity over the long-term. A more urgent concern was the need for more barge mooring areas around the Lydia Ann Channel. The Port of Harlingen made some additional, important suggestions including the straightening of a bend in the GIWW at the Queen Isabella Memorial Causeway. On September 15, 2001, a barge struck the causeway and partially collapsed it, killing eight motorists. The Port of Harlingen also encouraged TxDOT to keep the GIWW’s mooring areas clear and to remove abandoned barges.

The final set of suggestions involved TxDOT’s policies or activities toward the GIWW. The Port of Brownsville encouraged TxDOT to develop a Marine Highway along the GIWW to encourage the shift of cargo away from trucks to barges. Finally, the Port of Corpus Christi suggested that TxDOT facilitate and support the activities of private companies that seek to develop plans that involve the GIWW.

How to Better Utilize the GIWW

Respondent Response Port of Beaumont 1. Historically, the Port of Beaumont had not used the GIWW a great deal, but with the new crude oil facility at its Orange County terminal, it will be used to send oil to refineries in southeast Texas. 2. Most of the previous use of the GIWW was for the movement of small vessels from nearby shipyards and project cargo for local construction projects. 3. TxDOT should provide incentives so that shippers will have option of using a Container-on-Barge service. Port of Port Arthur 1. The GIWW provides barge access to the port. 2. TxDOT should work to insure that the GIWW be dredged and maintained to its federally authorized depth. Port of Houston 1. The GIWW is vital to the success of the Port of Houston. It connects the port to other Texas ports, ports along the Gulf of Mexico, and ports along the Mississippi Valley. 2. Five times as many tows (125,000) transited the Houston Ship Channel as did deep draft vessels. Many of these tows utilized the GIWW. 3. The GIWW needs additional barge moorings, replacement of outdated flood control and locking structures, and modernizing the antiquated bridges that traverse it. Port of Freeport 1. Barge traffic is anticipated to dramatically increase. 2. Various corporate partners use the GIWW for barge movement. Port of Palacios 1. The GIWW provides access to the port to recreation and commercial vessels. 2. TxDOT should work to insure that the GIWW be dredged and maintained to its federally authorized depth. Calhoun Port Authority 1. All barge traffic at the port uses the GIWW. Maintaining the GIWW at its authorized depth would reduce the costs to shippers who cannot fully load their barges. Port of Victoria 1. The GIWW is essential to the Port of Victoria’s existence. 2. TxDOT should work to insure that the GIWW be dredged and maintained to its federally authorized depth, including performing the maintenance dredging itself.

How to Better Utilize the GIWW (Continued)

Respondent Response Port of Corpus Christi 1. The GIWW serves outbound crude oil from the Eagle Ford Shale play and inbound frac sand and locally refined outbound products. 2. The GIWW also serves other dry bulk and liquid bulk commodities, as well as building materials and industry equipment. 3. TxDOT should consider performing dredging maintenance to keep the GIWW at a 12 foot draft 4. TxDOT should be evaluating methods to increase the dredge placement areas for dredge materials from the GIWW to insure long-term channel maintenance. 5. There is a desperate need for fleeting and mooring areas along the GIWW, especially around the Lydia Ann Channel. 6. Facilitate and support private partners and industries that seek to make improvements. Port of Harlingen 1. Barges regularly traverse the GIWW to reach the Port of Harlingen. 2. Straighten bend in GIWW at the Queen Isabella Memorial Causeway, which led to a barge hitting the causeway and partially collapsing it. Eight people died in that incident. 3. TxDOT should work to insure that the GIWW be dredged and maintained to its federally authorized depth. 4. Keep the GIWW and mooring areas clear of abandoned barges. Port of Port Isabel 1. The GIWW is key in some of the port’s plans to bring in new customers. 2. GIWW needs more frequent maintenance dredging. The current draft is significantly less than the authorized 12 feet, which makes barge less competitive with trucks. Port of Brownsville 1. TxDOT should develop a Marine Highway to encourage cargoes to shift from truck to water. 2. A Texas Marine Highway Program should be incorporated into the State’s Freight Mobility Plan

VALUE OF THE PAAC AND OPPORTUNITIES FOR IMPROVEMENT The next question asked the ports about the value of the Port Authority Advisory Committee (PAAC) and how it could be more responsive to meeting the needs of ports. The question asked was:

Question #4: Please describe how the Port Authority Advisory Committee (PAAC) serves your port, if at all. Are there opportunities for improvement in how the committee can better serve?

Most of the responses to this question urged TxDOT to use the PAAC less as a platform for disseminating information and more as a tool for coordination and promoting the mutual agenda of TxDOT and Texas ports, as well as to promote the allocation of state funds for port improvements. This sentiment was expressed more directly by the Ports of Port Arthur, Harlingen, and Brownsville. Three of the ports (the Ports of Beaumont, Palacios, and Corpus Christi) encouraged the PAAC and TxDOT to work together to find funding for the Port Access Account Fund, which was created by the Texas Legislature under Chapter 55 of the Texas Transportation Code. The Port of Brownsville made a similar recommendation, but pointed to the Texas Mobility Fund as a potential funding source. The Port of Brownsville also encouraged TxDOT to allow the PAAC to assist with project and program development for projects that link the ports to Texas’s transportation network.

Value of the PAAC and How It Can Be Improved

Respondent Response Port of Beaumont 1. Work with TxDOT to obtain funding for the Port Access Account Fund, which was established in Chapter 55 of the Texas Transportation Code. Port of Port Arthur 1. The PACC should expand its opportunities beyond just the reporting of information 2. The PAAC could participate in the process of allocating available funds to ports Port of Houston 1. The PAAC has provided some worthwhile services to the Port of Houston and Texas ports overall. 2. It primarily serves as a conduit for information between the port community and TxDOT to communicate needs and develop a better understanding of the movement of freight in Texas. Port of Freeport 1. The PAAC helps each port understand the other ports better 2. Helps facilitate discussions with other ports regarding the last mile port highway connector issues and freight mobility via all modes. Port of Palacios 1. Encouraged funding of the Port Access Account Fund. Identified several port infrastructure projects that could benefit from these funds. Calhoun Port Authority 1. The PAAC needs to make a greater effort to include the smaller ports in its discussions. Port of Victoria 1. The Port of Victoria is not a member of the PAAC, but trusts that its efforts benefit all Texas ports†. Port of Corpus Christi 1. The PAAC provides a forum for meeting with TxDOT and discussing infrastructure needs as they relate to ports. 2. Work with TxDOT to obtain funding for the Port Access Account Fund, which was established in Chapter 55 of the Texas Transportation Code. †The Port of Victoria has since become a member of the PAAC to represent Texas’s shallow draft ports.

Value of the PAAC and How It Can Be Improved (Continued)

Respondent Response Port of Harlingen 1. The Port receives regular communications that inform the staff on the PAAC’s activities, but it does not view them as being particularly valuable. 2. The PAAC should seek more input from ports that are not in the PAAC. 3. There was more communication and input when the PAAC was initially formed than there is now. The PAAC was also more active in its advocacy for Texas ports during the early period. Port of Port Isabel No response. Port of Brownsville 1. Uncertain if the PAAC has provided many benefits to Texas ports, although the situation appears to be slowly improving. 2. PAAC can assist TxDOT with project and program development that link the port with other elements of the state’s transportation network. 3. Can assist with supporting program changes to the state’s Mobility Fund [specifics not provided in the comment, but assumedly to support the development of port and landside infrastructure] 4. Work to advocate for transportation infrastructure funding in coordination with the mutual goals of TxDOT and the ports.

VISIONS OF THE NEAR FUTURE AND HOW TXDOT CAN ASSIST The final portion of the questionnaire asked ports about their visions of the future. The first of two questions focused on the ports’ view of their near-term future and how TxDOT might be able to assist them with achieving their goals. The question was:

Question #5: What would you like to see for the near future of your port and how can TxDOT play a role in achieving that goal(s)?

The ports’ responses to this question varied a great deal. Several ports identified new projects that they were trying to develop and needed funding assistance. A number of these projects and suggestions would fall under TxDOT’s purview or could be moved forward with TxDOT’s assistance.

Another role the ports envisioned for TxDOT was to be a greater advocate for their interests. The Port of Beaumont, for example, suggested that TxDOT work with the PAAC and the Texas Ports Association (TPA) to encourage the Texas Legislature to fund the Port Access Account Fund established under Chapter 55 of the Texas Transportation Code.

Ports’ View of the Near Future and Opportunities for TxDOT’s Assistance

Respondent Response Port of Beaumont 1. Suggests TxDOT work with the PAAC and the Texas Ports Association to obtain funding for the Port Access Account Fund, which was established in Chapter 55 of the Texas Transportation Code. Port of Port Arthur 1. The near-term construction of Berth 6 ($31 million project) and other infrastructure projects. 2. Needs TxDOT to include CMAQ funding for the port’s rail reliever project and other projects in the region. 3. Needs TxDOT’s assistance with landside connectivity projects that would help the port serve export-oriented customers. Port of Houston 1. The Port of Houston’s role as the lowest-cost link in the supply chain is critical to its competitiveness and growth. 2. It is critical that the public sector facilitate the movement of goods by the private sector between transportation modes. This facilitation means supporting established or developing freight corridors that minimize impacts to overall regional mobility. Port of Freeport 1. TxDOT, along with the Governor’s Office of Economic Development, could assist the ports by developing a state or regional rail policy. 2. TCEQ could assist in addressing the non-attainment issue so future economic development is not handicapped. 3. More emphasis should be placed on port connector routes, including a possible southern connector route around Houston for I-69 that allows connectivity for port MPO members to the interstate network. Port of Palacios 1. The Port is working towards a balance of fishing fleets and new commercial development. 2. It is attempting to develop some of its available land. 3. In addition to shallow draft port’s use of the GIWW, TxDOT should focus on helping these ports become support terminals for larger ports as they become busier. 4. The port needs assistance with constructing a rail spur to the UP line in Blessing. Calhoun Port Authority 1. There is a need for an oversize/overweight truck corridor between the port and Formosa Plastics. Port of Victoria 1. TxDOT should develop a state-wide freight policy which insures maximum freight efficiency without straining existing traffic loads on Texas roadways.

Ports’ View of the Near Future and Opportunities for TxDOT’s Assistance (Continued)

Respondent Response Port of Corpus Christi 1. Continue working with Texas ports to identify critical needs that will benefit the state-wide freight transportation system and the ports. 2. Continued collaboration with TxDOT’s Freight Advisory Committee to develop the Texas Freight Mobility Plan. 3. Fully develop the IH 69 corridor from Laredo to Corpus Christi 4. Reconstruct the Nueces Bay Causeway at Rincon Canal to be higher and wider to improve the operating conditions for barges. 5. Construct the SH 35 ramp reversal and US 181 grade separation for improved access to the La Quinta terminal. Port of Harlingen 1. Want to continue serving its customers in South Texas and expand its customer base to new businesses. 2. A more concerted effort by TxDOT to educate Congress and the USACE on the importance of keeping the GIWW dredged to its authorized depth. Port of Port Isabel 1. Construct a new entrance to the port that avoids existing neighborhoods. 2. Develop an overweight corridor along the new entrance road to SH 48 and along SH 48 into the Port of Brownsville. Port of Brownsville 1. Wants TxDOT to advocate the funding of channel deepening projects for the Port of Brownsville and other Texas ports with proposed channel deepening projects. 2. TxDOT can educate state and federal government on the importance of Texas ports to the state’s economy.

VISIONS OF THE LONG-TERM FUTURE The final question of the survey asked ports to visualize their port over 20 years and its contribution to the Texas economy. The question was posed as:

Question #6: How do you envision your port in the next 20 years and how will it serve the State of Texas?

In their responses, Texas ports were optimistic about their future and the future of the Texas economy. As would be expected, most ports mentioned their current and future role in regional and statewide economic development, job retention, and job creation. Many of the ports also emphasized their desire to continue serving their existing, as well as, future customers. Another common theme in many of the responses was their future role in energy exploration, production, and transportation. The Port of Houston pointed to the $50 billion of new investment in petrochemical manufacturing along the Houston Ship Channel. The Ports of Victoria and Corpus Christi highlighted their role in oil and gas exploration and

production in the Eagle Ford Shale play. The Port of Victoria took the somewhat prescient (or perhaps better defined as “experienced”) view that it would be necessary to position the port for new types of customers after the Eagle Ford Shale boom winds down. Further south, ports saw their importance in supporting the industries that build oil exploration and production platforms and equipment (Port of Corpus Christi), as well as providing offshore support services (Ports of Port Isabel and Brownsville). The Port of Harlingen was the only port to mention the possible movement of freight related to the opening of the Mexican oil industry to foreign investment. This very significant change in Mexico’s historic position towards foreign investment in its petroleum industry could have a positive impact on the Texas economy.

Many ports visualized that their facilities would have updated or new port infrastructure and that the channels serving their ports would be deepened. Some of these ports also envisioned new landside infrastructure.

Vision of the Port in 20 Years and Its Service to the State of Texas

Respondent Response Port of Beaumont 1. The port will develop its property in Orange County for intermodal use. 2. Existing wharves in Jefferson County will be replaced with state-of-the-art cargo handling facilities. 3. The port will continue to be an employment and economic development generator in the state. Port of Port Arthur 1. The port will continue to be viable and grow over the next 20 years, creating jobs and economic development in Texas. 2. Further deepening of the ship channel 3. Need for additional land, as well as road and rail infrastructure due to demand. Port of Houston 1. The key factors that have historically driven the port’s success will be drivers in the future: energy infrastructure; the efficient movement of cargo; and population growth. 2. The current investment of approximately $50 billion in petrochemical manufacturing facilities along the Houston Ship Channel will generate jobs and business for the port for many years into the future. These investments are expected to be completed within a few years. Port of Freeport 1. Will continue to pursue our preferred role as a “land lord” than an operating port. 2. Continue to offer expertise in international business and transportation to all types of clients. Port of Palacios 1. Located near multiple, large population centers, the port’s future opportunities are both commercial and recreational. 2. The port will continue to serve its customers and Matagorda County taxpayers by maintaining and developing safe navigation and marine facilities. This goal will be achieved in an efficient and cost-effective manner that stimulates economic development and the retention and creation of jobs. 3. The port seeks to operate in an environmentally sustainable manner, while encouraging responsible growth and good-paying jobs for its residents. Calhoun Port Authority 1. The port will become a major hub for the petrochemical industry and will continue to earn revenue and create new jobs for Texas.

Vision of the Port in 20 Years and Its Service to the State of Texas (Continued)

Respondent Response Port of Corpus Christi 1. The port will have the deepest channel in the Gulf of Mexico at 52 feet. 2. A new Harbor Bridge will be constructed with over 200 feet of clearance. 3. The port will have a modern rail network with a rail yard that has 14 miles of parallel track and siding. 4. The outer harbour will be where the largest off-shore platforms in the world are constructed and deployed from. 5. The La Quinta multipurpose terminal will be built and handle a large volume of containers every year. 6. The port will continue to handle its traditional cargoes of steel, military equipment, crude oil, petroleum products, and liquefied natural gas. 7. The port will continue to be a major generator of jobs and economic activity to the region, particularly as it relates to serving the Eagle Ford Shale play. Port of Harlingen 1. Continue to function as an economic engine for the region, handling fuels, lubricants, and construction materials for the local economy. 2. Continue exporting the region’s production of sugar, feed grains, and cotton. 3. Possibly supply Mexico’s petroleum industry with materials and equipment as it opens to foreign investment. 4. Continue supporting free trade with Mexico via the Los Indios Free Trade International Bridge. The port anticipates that the export of fertilizers and petrochemicals to Mexico will continue to grow. Port of Port Isabel 1. Will continue servicing the offshore oil and gas industry, as well as offshore wind power industry. 2. Become a regional hub for energy and job creation 3. Will construct new port facilities on surrounding land to serve its customers, particularly to support offshore energy production. Port of Brownsville 1. The port will continue to grow as a major transhipment center handling petroleum products, liquefied natural gas, propane gas, bulk commodities, and containers. 2. The port will be a logistical center for offshore logistical support for oil exploration and production in the Gulf of Mexico. 3. The port will attract major development to its available land. 4. The port will handle high-value cargo to its cargo mix. 5. The port will be a major employment center in the region.

SUMMARY Overall, as stated earlier, Texas ports are optimistic about their future and the future of the State of Texas. Texas currently finds itself in the fortunate position as being the economic powerhouse of the United States. This strength has, in no small way, been driven by the expansion of the state’s energy sector and the exploitation of new energy resources. While the economy is prosperous, Texas ports are eager to move forward with infrastructure improvements to their berths, docks, and storage facilities. Many ports are also keenly interested in deepening their ship channel and every port is concerned about maintenance dredging along the GIWW. Texas ports continue to look to state government to appropriate funds to the Port Access Account Fund, which could be used for many needed projects, but at a minimum, they want TxDOT to maintain its traditional role supporting landside access. Section 4 will discuss port financing issues and opportunities in greater detail.

SECTION 4 PORT FINANCE

Although most ports are subdivisions of the State of Texas, Texas ports have not historically received direct funding from the state for port infrastructure. The lack of state funding has meant that Texas ports have become largely self-sufficient, barring federal grants that are usually targeted to homeland security improvements and federally funded dredging of ship channels. This self-sufficiency has also meant that ports have developed a strong sense of autonomy and cautiousness. During 2013, Texas ports spent in excess of $300 million of their own funds (through revenues or bonding authority) on capital expenditures. The one indirect form of state-funded support that Texas ports have historically received has been in the form of landside roadway investments made by TxDOT. And, over time, the accumulated value of these landside projects has been very significant. Nonetheless, the lack of state funds for other port needs has generated frustration among some Texas ports, especially because there is a mechanism in place to address the issue but there have been no appropriations by the Texas Legislature. At the federal level, a few Texas ports have been successful with their efforts to acquire funds to partially pay for port infrastructure improvements and it is hoped that the recent enactment of the Water Resources Reform & Development Act of 2014 will provide additional funding sources to ports for channel dredging and maintenance.

PORT ACCESS ACCOUNT FUND The Port Access Account Fund (PAAF) was created by the 77th Texas Legislature to provide funds for Texas ports to finance security improvements, port infrastructure projects, and related studies. Specifically, Chapter 55 of the Texas Transportation Code allows money appropriated to the PAAF to be spent on:

1. Construction or improvement of transportation facilities within the port; 2. Dredging or deepening channels, turning basins, or harbors; 3. Constructing or improving wharves, docks, structures, jetties, piers, storage facilities, cruise terminals, or any other facility that is needed or can be used for transportation or economic development; 4. Construction or improvement of facilities for port security; 5. The acquisition of cranes or other mechanized equipment for moving cargo or passengers in international commerce; 6. The acquisition of land for port purposes; 7. The acquisition, improvement, enlargement, or extension of existing port facilities; and 8. Environmental protection through studies to obtain environmental permits or by acquiring or improving dredge spoil sites.

The selection of projects to be funded from the Port Access Account Fund is to be based upon a review of submitted projects by TxDOT in consultation with the PAAC. Together, their recommendations are sent to the Texas Transportation Commission, which makes the final decision on funding. The primary criterion for ranking the projects for selection is their estimated economic benefit.

Since its creation in 2001, the Texas Legislature has not appropriated any funds to the Port Access Account Fund.

TRANSPORTATION REINVESTMENT ZONE (TRZ) Due to the lack of direct funding, some Texas ports are beginning to explore other funding mechanisms offered by the state. During the 83rd Texas Legislature, ports were made eligible to use Transportation Reinvestment Zones (TRZ) as a funding tool. A TRZ is a delineated, underdeveloped area, where a new transportation project is to be built. Generally TRZs allow a sponsoring entity to capture incremental tax revenue above a baseline year to be reinvested in a project designated within the zone. It is assumed that tax revenues will increase due to infrastructure projects, so that the revenue increase can be appropriated to pay for the cost of new infrastructure. TRZs may be set up by a county or a city. A TRZ must also be deemed underdeveloped and the proposed project must: 1) promote public safety; 2) facilitate the improvement, development, or redevelopment of property; 3) facilitate the movement of traffic; and 4) enhance the local entity’s ability to sponsor transportation projects.

Several ports are exploring the use of this tool. The Ports of Beaumont and Port Arthur, along with the Sabine Neches Navigation District, have created TRZs, as has the Port of Brownsville.

TEXAS MOBILITY FUND Created by the 77th Texas Legislature, the Texas Mobility Fund is a revolving fund that issues bonds secured by future revenues so that transportation projects can be built more quickly. In the 83rd Session, the Texas Legislature passed language, subject to the passage of a constitutional amendment, allowing the Texas Mobility Fund to finance port improvements. With this in mind, the Sabine Neches Navigation District has requested a loan from the Texas Mobility Fund to assist with paying the non-federal portion of the deepening project for the Sabine Neches waterway.

OTHER STATE AND FEDERAL FUNDING SOURCES There are other state and federal funding sources that could be used to fund new transportation infrastructure. Below is a partial listing of available programs:

• Transportation Investment Generating Economic Recovery (TIGER) Discretionary Grants – TIGER grants are funded through a competitive selection process that has allocated $4.1 billion, since 2009, for projects that “promise to achieve critical national objectives” and “have a significant impact on the Nation, a region, or a metropolitan area”. Successful projects are also expected to have a state or local match (historically 2:1). To date, over $400 million of TIGER money has been allocated to port projects across the United States. There have been three port- related TIGER grants awarded in Texas over the life of the program: 1. Brownsville Navigation District – In 2012, $12,000,000 was awarded for the construction of a 600-foot cargo dock to expand marine highway container operations. 2. Port of Corpus Christi – In 2012, $10,000,000 was awarded to build a rail siding. 3. Port of Houston – In 2013, $10,000,000 was awarded to the Port of Houston to extend the Bayport Terminal wharf from 3,300 feet in length to 4,000 feet in length.

• Regional Mobility Authority (RMA) – RMAs are political subdivisions of the state created by the Legislature. RMAs have bonding authority and can finance, design, construct, operate, maintain, expand or extend transportation projects. The projects undertaken by RMAs may be tolled or non-tolled, but as a matter of practice all RMA roadway projects to-date have been tolled. Cameron County is the only county in the state with an RMA that also has maritime ports (Ports of Brownsville, Port Isabel, and Harlingen).

• Transportation Development Credits – States receive federal transportation development credits for investment in toll facilities (excluding maintenance, debt service, and returns to investors). Three-quarters of these credits are assigned to the MPO where the project occurred and the remaining quarter is assigned to the Texas Transportation Commission to use around the state of Texas. Transportation Development Credits can be used meet federal matching requirements for a project but they do not convert into actual monies that can be used to pay for a project’s construction.

WATER RESOURCES REFORM & DEVELOPMENT ACT (WRRDA) OF 2014 On June 10, 2014 the President signed the Water Resources Reform & Development Act (WRRDA) of 2014, which was a bipartisan effort to address many of the funding shortfalls and inefficiencies that ports experience when developing projects. Some of the major actions of this important piece of legislation include:

• Requires an Assessment of the GIWW – The USACE is required to conduct an assessment of the operations and maintenance needs of the GIWW. This assessment was specifically requested by TxDOT and the Texas Delegation.

• Authorizes Channel Improvement Projects – Authorizes the final feasibility studies for two Texas navigation projects. The first navigation project is the Sabine Neches Waterway which has an estimated cost of $1,114,040,000 with a $748,070,000 federal contribution. The second navigation project is Freeport Harbor with a total estimated cost of $239,300,000 and a federal contribution of $121,000,000. The WRRDA also authorizes project modification to the Corpus Christi Ship Channel project, which has a total estimated cost of $353,231,000 and a federal contribution of $182,582,000.

• Streamlines Regulatory Requirements – USACE studies for projects are now limited to three years in length. Prior to this limit, it was not uncommon for project studies to require 10-15 years for completion. Multiple divisions and the hierarchy of the USACE must now view studies concurrently rather than sequentially. The process of studies has been consolidated and duplicative analyses have been eliminated. All of these actions are expected to expedite project implementation and reduce expenditures during the preparation of the studies, as well as reduce the opportunity costs related to delays.

• Expands Funding Opportunities – WRRDA allows various tools to assist ports with funding projects. Examples include limited credit for local agencies that carry out operations and maintenance on authorized navigation projects. It also establishes a Water Infrastructure Public Private Partnership Program modelled on the Transportation Infrastructure Finance and Innovation Act (TIFIA) program.

• Supports Underserved, Emerging Ports – WRRDA requires that not less than 10 percent of the allocated funds be directed towards “emerging” harbors between FY 2015 and FY 2022. Emerging harbors are defined as those that handle less than 1 million tons of cargo annually. The remaining portion of funding is to be allocated to high use and moderate use harbors. High use harbors are defined as 10 million tons or more of cargo annually. Moderate use harbors are defined as more than 1 million tons but less than 10 million tons annually. In addition to the 90/10 percent split, the USACE must authorize 5 percent of the funding to Underserved Harbors, which are defined moderate use or emerging harbors maintained at less than authorized dimensions for six fiscal years.

Port Designations under the Water Resources Reform & Development Act of 2014

HIGH USE HARBORS Name Short Tons Port of Houston 238,185,582 Port of Beaumont 78,515,010 Port of Corpus Christi 69,001,357 Port of Texas City 56,721,627 Port of Port Arthur 30,618,123 Port Freeport 22,084,551 Port of Galveston 11,618,368 Calhoun Port Authority 11,589,123

MODERATE USE HARBORS Name Short Tons Port of Brownsville 5,600,977 Port of Victoria 4,517,632

EMERGING PORTS Name Short Tons Port of Harlingen 800,000 Port of Orange 732,450 Port of Port Isabel 120,000

• Rectifies Allocation of the Harbor Maintenance Trust Fund Tax – One of the most important elements of the WRRDA is that it stops the reallocation of funds collected specifically for the purpose of harbor maintenance. This change will occur incrementally so that by FY 2025, 100 percent of the revenue collected from the Harbor Maintenance Tax (HMT) will go to that purpose.

• Provides Discretionary Funding – WRRDA authorizes discretionary appropriations of $50 million per year between FY 2015 and FY 2018 for qualifying ports designated as donor or energy transfer ports (split equally), with the potential to extend these appropriations through FY 2022. A donor port is defined as one that collects at least $15 million in HMT annually and received less than 25% of the collected HMT back in the last five fiscal years and handled more than 2 million TEUs during FY 2012 (unfortunately, the Port of Houston falls short of this threshold). An Energy Transfer Port is a port that is subject to the HMT under CFR 19 Section 24.24 at which energy commodities (petroleum products, natural gas, coal, bio fuels, wind and solar energy components) comprised greater than 25% of all commercial activity by tonnage in FY2012 and through which more than 40 million tons of cargo were transported

during FY 2012. Among the public ports, the Ports of Houston, Corpus Christi, Texas City, and Beaumont meet these criteria.

PORT FUNDING TOOLS IN OTHER GULF STATES While the Texas Legislature has not appropriated funds to the Texas Port Access Account Fund, other states along the Gulf of Mexico are actively funding their ports to improve their competitiveness. The sections below provide a summary of the various programs that are available to ports in Louisiana, Mississippi, and Florida. Alabama, like Texas, does not provide any state funds to its ports (despite operating the Port of Mobile under the Alabama Ports Authority) and expects their ports to be completely self-sufficient.

Louisiana The state of Louisiana is Texas’s closest competitor for existing business and has two state- funded port development programs, which are described below:

Port Construction and Development Priority Program - This program is open to all public port authorities in Louisiana when considering a new capital project. A wide variety of projects may be funded through this program, as long as they are maritime-related and have an immediate economic impact. Feasibility projects must be submitted in order to request funds with approved projects able to receive up to $15 million over three years and the ports must be willing to pay for engineering costs and 10 percent of construction costs. Additionally, projects must have a Rate of Return on the state’s investment of at least 2.375 and a cost-benefit ratio greater than 1.0. In order to be approved, recommended projects must be submitted to the House and Senate Committees on Transportation, Highways, and Public Works to be approved and sent to the Louisiana Legislature for funding. During 2012, $19.7 million was appropriated to projects in this program.

Delta Regional Authority “States’ Economic Development Assistance Program” - Participating member states, local governments, public bodies, and non-profit entities of the DRA are eligible for the SEDAP program (private/for-profit entities are ineligible for this program). Additionally, any entities owing federal debt are not eligible for funds until the debt has been paid in full. Four funding categories are available through the program: basic public infrastructure in distressed counties; transportation infrastructure for the purpose of economic development and growth; business development; and job training or employment- related education.

Mississippi Of the 16 public ports in Mississippi, only two are directly controlled by the state while 14 are operated under various governance structures at the city or county level. Several programs are available to these ports to fund capital improvement projects. However, the overall funds available to ports each year is fairly limited.

Multimodal Transportation Capital Improvement Program Fund - This program was enacted by the Mississippi Legislature in 2000 as a funding mechanism for short line railroads, public airports, mass transit, and ports. No specific annual amount is deposited to the fund in a given year but, historically, approximately $10 million per annum is appropriated by the Mississippi Legislature (Wagner et al, 2009). Of the deposited amount, 38 percent may be utilized by the ports for approved projects. No local match is required to access funds derived from this program, but all funds allocated to a project must be spent in that calendar year and cannot be carried over to the following year. As of 2005, $26.6 million had been funded through this program of $67.3 million requested.

Intermodal Connector Improvement Program - “The Intermodal Connector Improvement Program (which is dedicated to roadways, access roads, marshalling areas, etc.) is administered by the Mississippi Department of Transportation from the federal funds that generally reflect the Department’s multi-year construction schedule. To date, the ports have received approximately $14 million of these federal funds.” (Wagner et al, 2009)

Port Revitalization Revolving Loan Program - The Mississippi Development Authority provides low-interest loans through the Port Revitalization Revolving Loan Program. These loans, made available to public port authorities, are meant to aid capital improvement projects which promote commerce and economic growth in Mississippi. The loans are not to exceed $750,000 and have a 3% interest rate with a 10-year pay-out period.

Alabama The Alabama Ports Authority administers all public ports in the State. According to a report prepared by Wagner et al. (2009), the Ports Authority does not receive any support from the State of Alabama. Alabama’s ports are dependent on their own revenues in order to fulfill monetary obligations for operations and capital spending.

Florida Florida’s state legislature has established several funding programs available to its ports. Available funds vary from year to year, with an additional $50 million awarded in 2007. The four main programs identified by Wagner et al. (2009) are:

Florida Ports Financing Commission Loan Program - This program provides access to bonds for capital projects by the Florida Seaport Transportation and Economic Development Council that are accepted by the Florida Ports Financing Commission. The funds are made available through the sale of bonds that are then “loaned” to accepted port projects. Repayment of the bonds is drawn solely from funds generated by motor vehicle registration fees to pay debt service. This program resulted in a $25 million annual expenditure on the debt service.

Florida Seaport Transportation and Economic Development Program - Florida makes $15 million available annually for capital improvement projects at its ports, with $8 million dedicated by law and $7 million in additional funding from FDOT’s annual budget. Funds are only awarded with a 50-50 match on approved projects and for projects that are consistent with a port’s master planning documents. A wide variety of projects are eligible for these funds: transportation facilities; harbor dredging or deepening; construction or rehabilitation of docks, wharves, or other maritime facilities; acquiring Vessel Tracking Systems; container cranes; land acquisition; environmental protection projects; seaport intermodal access projects which are part of the five-year Florida Seaport Mission plan; and transportation facilities not part of the DOT work program. Limits on use of this fund are set at $7 million in a given year and $30 million during any 5-calendar year period for a single port (Wagner et al, 2009).

State Infrastructure Bank - This option for financing capital projects is generally used in conjunction with other funding mechanisms. The SIB is a revolving loan and credit enhancement program that consists of three accounts: 1) a federally funded account derived from federal and state-matched funds; 2) a state funded account derived from state funds and bond proceeds; and 3) an emergency account for declared state emergencies that would also be funded by state monies and bond proceeds. For projects drawn from the federally funded account, all requirements of SAFTEA-LU must be followed. State funded projects are limited to transportation facility projects on the State Highway System or that provide for enhanced mobility or intermodal connectivity with the state’s transportation system, airports, seaports, rail facilities, and other facilities that increase the movement of people, cargo, and freight. Repayments to the SIB are required to begin within 5 years of project completion or when the project is open to traffic, whichever is later. Repayment cannot exceed 30 years from first payment (Wagner et al, 2009).

FDOT District Intermodal Funds - Discretionary funds for intermodal projects are available to ports within each FDOT district. Intermodal funds generally require a 50/50 match (Wagner et al., 2009).

SUMMARY Although Texas ports are thriving under current conditions, the lack of state funding for port infrastructure improvements and equipment is increasingly being viewed as a concern by many Texas ports (although this view is not unanimous). With the exception of Alabama, other states along the Gulf of Mexico are providing meaningful state funds to their ports and these funds are improving their competitiveness. Given the growing competition between states for new jobs and job retention, it is conceivable that current funding disadvantage for Texas ports will one day have tangible consequences.

SECTION 5 TOPICS FOR FUTURE CONSIDERATION BY THE TEXAS TRANSPORTATION COMMISSION

It is generally recognized by the Texas maritime industry that this is a golden age. Texas ports have been buoyed by the state’s remarkable demographic and economic growth over the past two decades, the sustained and intensifying pace of globalization, and the current boon in the oil and gas industry that was sparked by the widespread use of hydraulic fracturing. Even the impacts of the severe 2008-2009 Recession were handled by Texas ports with fewer consequences than were experienced by ports in many other regions of the nation. As a result, cargo volumes have been strong and many Texas ports are dealing with the desirable concerns related to accommodating growing demand. But, alongside the positive, there is also an ongoing recognition of the need to deepen ship channels and maintain the GIWW, as well as to replace aging infrastructure and equipment at many ports. If Texas ports do not have the facilities (docks, warehouses, channel depth, etc.) to handle future cargo growth, then the cargo will move through ports in neighboring states, resulting in a loss of jobs, revenue and economic output. TxDOT’s renewed commitment to Texas ports provides an opportunity to support their growth by providing targeted assistance to build, expand, or upgrade existing roadway infrastructure, supporting the continued dredging of the GIWW (as its non-federal sponsor) and the state’s ship channels, and, possibly, to provide other forms of assistance that will improve ports competitiveness. The current golden age cannot be taken for granted.

As the state’s transportation agency, TxDOT’s role is to coordinate the efficient movement of goods across all modes, despite statutory and constitutional requirements that mostly limit its activities to the state’s highway system. Nonetheless, TxDOT can still be an effective enabler of Texas ports by improving landside access and representing the overall interests of the Texas’s freight transportation network. In some instances, this representation could be as simple as legitimizing the needs of individual ports as they interact with federal agencies that provide project funding. In other cases, it could require providing technical expertise or even considering requests for funding support, if the legal framework is in place. It is also important to recognize that macro-level trends such as the growing national economy, the Panama Canal expansion, and the shale oil and gas boon are among the major driving forces behind growing port demand, but they are explanations not solutions. The practical solutions for handling new demand are what the ports and TxDOT must be deal with at a localized level and, sometimes, even at the micro-level, such as a road, a railroad, a channel, a terminal, a dock, or a piece of equipment.

The sections below identify key areas for future investigation and consideration by the Texas Transportation Commission that were identified during the preparation of this report. Many

of these topics were identified by the ports through their interactions with TxDOT and previously described questionnaires and their participation at a PAAC-hosted workshop held in March 2014.

Explore Investment Opportunities for Landside Infrastructure – Consider identifying categories of key infrastructure improvements for ports that TxDOT can assist with under its current constitutional and statutory limitations (such as overweight truck corridors, removal of at-grade rail crossings, air draft clearance, etc.) and request that ports submit competitive requests to TxDOT for funding those projects. Among the suggested improvements, overweight truck corridors are frequently mentioned by the ports as an asset that would make them competitive with other ports outside of Texas, since it would allow shippers to move goods with fewer truck drays and promote the development of distribution centers. Additionally, there are needed transportation improvement projects around the state that would assist Texas ports with moving goods to and from markets. These projects should also be given additional consideration.

Provide Leadership for Texas’s Dredging Needs – Many of Texas’s deep water ports are pursing permits or funding to widen or deepen their ship channel. At the same time, many in the maritime industry are very concerned about the USACE’s lack of resources to maintain the GIWW at its authorized depth. As the state’s transportation agency and the non-federal sponsor for the GIWW, Texas ports are looking to TxDOT to provide leadership for the state’s dredging needs. This desired leadership is not necessarily related to the State of Texas funding for dredging projects. Rather, Texas ports are looking for TxDOT to use its influence and take a proactive role with the USACE to actively promote dredging projects along Texas port channels and GIWW. Although direct funding of needed dredging project or even performing dredging itself are options, most dredging experts see these solutions as creating new problems for USACE, TxDOT, and Texas ports.

Transportation System Approach – TxDOT’s statutory and constitutional focus is to build and maintain the state’s roadway network, so it is natural that roadway concerns dominate its attention. But, improving freight mobility for other transportation modes can also be a means of meeting one of TxDOT’s key responsibilities, particularly as these other modes mitigate congestion by maintaining or increasing their share of freight movements. The role that Texas ports have in handling intrastate freight movements, as discussed in Appendix B, is critical to avoiding even greater congestion on Texas highways. Several Texas ports have expressed an interest in the development of a marine highway along the Texas segment of the GIWW. A marine highway along the Texas Coast could be used to encourage an even greater volume of freight movements to occur along the GIWW, which would help to mitigate congestion along the state’s roadway and railway networks at a relatively low cost.

Encourage Commodity Diversification at Texas Ports – Texas’s maritime trade is highly dependent upon the petrochemical industry for the cargoes it handles. While this specialization has unquestionably benefited Texas ports, it would also be prudent to encourage growth in other commodity markets so that natural market fluctuations have less impact on cargo volumes. Rather than attempt to directly influence the types of commodities handled at Texas ports, any strategy would likely focus on taking advantage of new opportunities and may require additional support from the State of Texas.

Strengthen Relations with Local Port Authorities and Administration - The Commission and TxDOT’s staff are currently entering into a new era of coordination and collaboration with Texas’s port authorities, so they must be cognizant of the inevitable autonomy issues that can arise when working with another entity of the state. Port administrators are particularly aware of these issues, since they alternately desire to work closely with TxDOT and work closely with and respond to the port commission that has authority over them. Additionally, because ports engage in revenue generating activities that occur within an environment that has high capital expenditures and an environment that is intensely competitive, their administrators must constantly mitigate the risks of participating in any program, by ensuring that the port’s needs or ambitions are met and its risks rewarded. This approach differs from most other public agencies, which are expected to provide services to the public that would not be otherwise available. Put another way, most public agencies do not actively compete against other state agencies to provide the same or similar service to the public. However, this is what Texas ports do. TxDOT will be most effective in supporting Texas ports, if it engages them with a nuanced understanding of this unique relationship.

Port Infrastructure Funding - Texas is among a minority of U.S. coastal states that do not provide state funds for their ports. Within the Gulf of Mexico, Louisiana and Florida are especially active at providing state funding. Although Texas ports have been able to compete thus far by annually investing hundreds of millions of dollars of their own money, competition with ports in states that do provide financial support raises the stakes. The most direct mechanism for providing funds for port improvements would be for the Legislature to obligate funds to the Port Access Account Fund, found in Chapter 55 of the Texas Transportation Code. Funding to ports could be allocated by categories, so that each port has an opportunity to receive funding relative to its size or function. Examples of these categorizations can be found in the table in the introductory section (e.g. small, medium, large, comprehensive, specialized, niche, etc.).

Pursue Further Study of Critical Maritime Issues – While this report has covered a number of issues that are important to Texas ports, many of the topics require more detail for planning and policy purposes, while others have yet to be studied. Examples of future studies that would benefit the Commission, TxDOT’s Maritime Division, and Texas ports include: detailed maritime trade analyses at the region, country, or commodity level; research into the

opportunities for Public-Private Partnerships; implementing intelligent transportation systems (ITS) around ports; and continued monitoring of macroeconomic and maritime industry trends.

SOURCES

American Association of Port Authorities. 2014. AAPA Seaports of the Americas – 2014 Membership Directory. Naylor, LLC: Gainesville, FL.

Armstrong, John H. 1998. The Railroad - What It Is, What It Does: The Introduction to Railroading 4th ed. Simmons-Boardman Books, Inc.: Omaha, NE.

Calhoun Port Authority. 2014. Calhoun Port Authority Website. www.calhounport.com

Calhoun Port Authority. 2012. Annual Financial Report – For the Year Ended June 30, 2012.

Foreign Trade Zones Board. 2014. Frequently Asked Questions. http://enforcement.trade.gov/ftzpage/info/ftzstart.html.

Jackson, Alan A. (2006). The Railway Dictionary (4th ed.). Sutton Publishing Ltd.: United Kingdom.

Kruse, J.C. and N. Hutson. 2010. NCFRP 5: North American Marine Highways. Transportation Research Board, National Academies: Washington, D.C.

Martin Associates. 2006. The Local and Regional Economic Impacts of the Port of Beaumont and Port Arthur. Lancaster, PA.

. 2012. The Local and Regional Economic Impacts of the Port of Brownsville. Lancaster, PA.

. 2012. The Local and Regional Economic Impacts of the Port of Corpus Christi. Lancaster, PA.

. 2012. The Local and Regional Economic Impacts of Port Freeport. Lancaster, PA.

. 2012. The Local and Regional Economic Impacts of the Port of Galveston. Lancaster, PA.

. 2012. The Local and Regional Economic Impacts of the Port of Houston. 2011. Lancaster, PA.

Port of Beaumont. 2014. Port of Beaumont Website. www.portofbeaumont.com.

Port of Brownsville. 2014. Port of Brownsville Website. www.portofbrownsville.com.

Port of Corpus Christi. 2014. Port of Corpus Christi Website. www.portofcorpuschristi.com.

Port Freeport. 2014. Port Freeport Website. www.portfreeport.com.

Port of Galveston. 2014. Port of Galveston Website. www.portofgalveston.com.

Port of Harlingen Authority. 2014. Port of Harlingen Authority Website. www.portofharlingen.com.

Port of Houston Authority. 2014. Port of Houston Authority Website. www.portofhouston.com.

Port Isabel-San Benito Navigation District. 2014. Port Isabel-San Benito Navigation District Website. www.portofportisabel.com.

Port of Orange. 2014. Port of Orange Website. www.portoforange.com.

Port of Palacios – Matagorda County Navigation District No. 1. 2014. Port of Palacios Website. www.portofpalacios.com.

Port of Port Arthur. 2014. Port of Port Arthur Website. http://portofportarthur.com.

Port of Port Mansfield – Willacy County Navigation District. 2014. Port of Port Mansfield. http://portofmansfield.com.

Port of Texas City. 2014. Port of Texas City Website. www.tctrr.com.

Port of Victoria. 2014. Port of Victoria website. www.portofvictoria.com.

Port of Victoria. 2013. June 2013 Newsletter. Vol. 1, Issue 1.

Siegesmund, P. et al. 2008. Guide to the Economic Value of Texas Ports. Report 0-5538- P1. Center for Transportation Research, University of Texas at Austin: Austin, TX.

Texas Ports Association. 2014. Texas Ports Association Website. www.texasports.org.

U.S. Maritime Administration (MARAD). 2014. National Port Readiness Network. http://www.marad.dot.gov/ports_landing_page/nprn_home/nprn_home.htm.

Wagner, D. A., J Cocchiara, and J.M. Orlesh Jr. 2009. Report on State Financial Assistance for Capital Improvements at Public Ports in the United States. The Ports Association of Louisiana.

APPENDIX A OVERVIEW OF CURRENT MACROECONOMIC TRENDS AFFECTING TEXAS PORTS

INTRODUCTION Freight transportation trends are inherently driven by macroeconomic factors at the regional, national, and global level and Texas’s maritime ports are no exception to this rule. As of mid-2014, Texas ports have been operating within a period of strong demand and new opportunities, much of which have been sparked by exploration and production in the energy industry. However, strong population growth and general economic expansion in Texas have also provided a firm underpinning to sustain this growth. On the horizon is the completed Panama Canal expansion, which is anticipated to be a positive contributor to the Texas economy and is expected to open in the next 18 to 24 months.

STATEWIDE ECONOMIC TRENDS The stability and growth of the Texas economy during the nationwide economic turmoil of 2008 and its aftermath is so highly touted that it is often referred to as a “miracle.” While the state’s robust economic landscape is certainly worthy of accolades, the reason for its health and future growth is more than just a miraculous event, it is the result of positive trends in population, employment, production, and trade among other things. To better understand the state’s economy as a whole and its future direction, a closer look at these positive trends is warranted.

Population helps drive any economy. A state’s residents need housing, goods, and services; while, at the same time, these residents are also become an important ingredient, as both employees and founders of the companies providing those items – in the state and beyond. The last two decades have seen a steady upward trend in population migration flows from both within the country and internationally.

Texas’s Population Trends, 1993-2013

Sources: U. S. Census Bureau and the Real Estate Center at Texas A&M University, 2014.

In absolute numbers, Texas led the nation between July 1, 2012 and July 1, 2013 adding 387,000 residents while coming in third in terms of rate of growth, only falling behind an oil- boom fueled North Dakota and Washington D.C. (Young, 2013). While population growth is helping to drive the Texas economy, a closer look at that growth offers insight into future trends for the economy and the state. The dynamics of the state’s population growth have shifted over the past few decades. Where the population flows are originating speaks to the fact that Texas is not just a popular destination for international migration – largely from Mexico and Central America – but increasingly a top location for residents of other states. A mix of increased border security after the September 11, 2001 terrorist attacks and nationwide economic crises in 2001 and in 2008 have resulted in a steady decline in international migration from a high of almost 160,000 in 2001 to 64,187 in 2013 (Snyder, M, 2008 and Gilmer and Hopper, 2001). At the same time, the ability of Texas to foster a diversity of industry, the boon in energy due to hydraulic fracturing and rising energy prices, and comparatively affordable cost-of-living combined to make the state an increasingly attractive relocation spot for domestic migration hitting a high of 232,616 in 2006 and remaining above 100,000 in the following years save for 2010 (Thompson, 2010).

Net Migration to Texas: 1993 – 2013

Sources: U. S. Census Bureau; Real Estate Center at Texas A&M University

The state’s population growth is forecasted to continue for several decades. Using a conservative formula to estimate future trends, the Office of the State Demographer suggests Texas will be home to just over 41 million residents by 2050 (Potter and Hoque, 2013).

The steady influx of new residents detailed here has been met with expanding employment opportunities. While many other states still struggle with replacing jobs lost to the economic crisis in 2008, Texas continues to add them at a quickening pace. By 2011, the state returned to pre-recessionary employment levels, by 2012, it surpassed them.

Employment Growth in Texas: 2000 – 2013

Sources: Bureau of Labor Statistics and the Federal Reserve Bank of Dallas, 2014.

The state’s diverse economy is responsible for this steady rise in employment. Much like Texas’ transformation into an urbanized state with continuing connections to its rural past, the Texas economy has grown to add industries like health and education, business services, and information services to the state’s traditional industries of energy and agriculture. With the state’s economy and associated employment spread out across many industrial sectors, Texas was able to weather the 2008 economic crisis with the success of some sectors compensating for the underperformance of others. For example, examining job growth by industrial sector between 2010 and 2013 illustrates how positive gains in energy and mining occupations helped balance losses in sectors like construction and information services. There are signs of the state’s economy slowing down with only the information services and government sectors registering growth in employment from 2012 to 2013, while other sectors flattened or experienced losses (Phillips and Slijk, 2014). Despite these losses and generalized cooling, Texas remains a leader in job growth – falling behind only North Dakota and Florida in 2013 – and the state’s varying industrial sectors are forecasted to grow during 2014 (Phillips and Slijk, 2014).

Annual Employment Change in Texas by Industry: 2010 - 2013

Note: Not all industries included; percentages do not total 100. Sources: Bureau of Labor Statistics and Federal Reserve Bank of Dallas, 2014.

The strength of the Texas economy not only encompasses the state, but extends beyond its borders engaging with other economies internationally. Texas is the leading export state in the country (Wright, no date). The nature of the state’s international trade is diverse and facilitated by the state’s extensive border ports-of-entry, maritime ports, and airport infrastructure. The export of petroleum products dwarfs other offerings from Texas in terms of value, but the list of products exported encompasses everything from electronics to propane.

Top 10 Texas Exports: 2012-2013

2012 2013 2012 2013 2012-13 Rank Description Value Value % Share % Share % Change

1 Petrol Oil Bitumous Mineral (Not Crude) Etc Nt Bio $34,282 $36,656 13.0 13.1 6.9 2 Lt Oils, Preps Gt=70% Petroleum/Bitum Nt Biod $19,777 $21,753 7.5 7.8 10.0 3 Parts & Accessories For Adp Machines & Units $6,731 $9,717 2.5 3.5 44.4 4 Processors And Controllers, Integrated Electronic $4,644 $4,980 1.8 1.8 7.2 5 Civilian Aircraft, Engines, And Parts $4,955 $4,979 1.9 1.8 0.5 Machines for the 6 $5,085 $4,874 1.9 1.7 -4.1 Recept./Convers./Transmis./Regen. of Voice/Image 7 Propane, Liquefied $2,471 $4,587 0.9 1.6 85.6 8 Parts For Boring Or Sinking Machinery, NESOI $4,881 $4,189 1.8 1.5 -14.2 9 Acyclic Ethers (Excluding Diethyl Ether) NESOI $2,909 $2,926 1.1 1.0 0.6 10 Parts And Accessories of Motor Vehicles, NESOI $3,815 $2,850 1.4 1.0 -25.3 Note: Value in millions of dollars based on 2013 dollar value Source: U.S. Census Bureau

The countries of Mexico and Canada are the leading destinations for Texan products and account for almost 45 percent of its export trade. While a significant proportion of NAFTA export trade occurs as surface trade (i.e. moves by land modes such as truck, rail, or pipeline), another significant share moves over water. The remaining 55 percent of Texas’s trade is with countries that require moving cargoes by maritime vessels or airplanes, exclusively.

Top 10 Countries for Texas Exports: 2012-2013

2012 % 2013 % 2012 – 2013 Rank Country 2012 Value 2013 Value Share Share % Change 1 Mexico $94,456 $100,994 35.7 36.1 6.9 2 Canada $23,853 $25,885 9.0 9.3 8.5 3 Brazil $10,036 $10,830 3.8 3.9 7.9 4 China $10,306 $10,737 3.9 3.8 4.2 5 Netherlands $9,612 $9,583 3.6 3.4 -0.3 6 South Korea $7,781 $7,917 2.9 2.8 1.8 7 Colombia $5,629 $7,287 2.1 2.6 29.4 8 Singapore $6,387 $5,810 2.4 2.1 -9.0 9 Venezuela $6,943 $5,429 2.6 1.9 -21.8 10 Japan $4,673 $5,075 1.8 1.8 8.6 Note: Value in millions of dollars based on 2013 dollar value Source: U.S. Census Bureau, 2014.

ENERGY PRODUCTION AND EXPLORATION The emergence of gas as a primary export item for Texas is mirrored by other petroleum products produced by the state and distributed internationally. This specifically impacts Texas in light of the state’s port infrastructure, which is struggling to keep up with an energy boon speculated to last well into the future (Blackmon, 2013 and Murtaugh, 2014). Although the increased domestic production of oil and gas has caused imports to taper off the last few years at the Houston-Galveston Customs District, this decline is more than offset by “sharply higher exports” of oil and gas largely due to the high productivity of the Eagle Ford Shale oil and gas play in South Texas (Jordan, 2013). To place this boon and its impact on ports in the Gulf into perspective, the managing director of the Port of Corpus Christi notes that in his 27 years of employment at the port, the volume of activity in the last two years has outstripped activity in the prior 25 years… combined (Murtaugh, 2014).

The number of active natural gas production wells in Texas has steadily risen since 1990, with an increase of more than 40,000 wells between 2000 and 2010 alone (compared with about 10,000 new wells between 1990 and 2000). As of 2012, there were an estimated 102,218 active natural gas wells in the State. Combinations of horizontal drilling and hydraulic fracturing have led to this dramatic growth of natural gas and oil production in several regions of the state.

Texas is also benefiting from the oil production activities located in other areas of the United States. The Port of Beaumont, for example, handles oil produced in Colorado and Wyoming. The port’s recently completed terminal receives crude oil via rail tank car and then transloads the oil into barges that carry it to a refinery. These types of transloading activities are growing because new production from hydraulic fracturing is occurring in locations that lie outside of the nation’s existing oil pipeline network and the process of building new pipelines has become very slow or uneconomical.

Operating Gas Wells in Texas, 1990 – 2012

110,000 102,218 (2012) 100,000

90,000

ells 80,000

g W n

i t 70,000

Opera 60,000

50,000

40,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Source: Railroad Commission of Texas, 2014.

The production of natural gas and crude oil has risen sharply to match the increase in drilling. Between 1990 and 2004, natural gas production was variable, resulting in a modest overall increase, despite the constantly growing number of wells. However, starting in 2005, production volumes grew dramatically from 5.7 billion Thousand Cubic Feet (Mcf) to 7.5 billion Mcf in 2009, due to high oil prices and the widespread practice of hydraulic fracturing. Gas production volumes fell during the following years, but were still greater than 7.1 billion Mcf during 2012. The reversal of declining Texas crude oil production has been even more remarkable. From 1990 to 2007, Texas’s crude oil production fell by almost half to 336,222 thousand barrels (Mbbl) annually. However, during the two-year period between 2010 and 2012, crude oil production increased from 356,911 Mbbl to 533,141 Mbbl or by nearly 50 percent. The driving force behind this growth was the Eagle Ford Shale in South Texas, which produces a very light, sweet crude oil.

Annual Natural Gas (Mcf) and Oil (Mbbl) Production in Texas, 1990 – 2012

8,000,000,000 700,000

650,000 7,500,000,000

600,000

7,000,000,000 550,000

6,500,000,000 500,000

450,000 6,000,000,000

400,000

5,500,000,000 350,000

5,000,000,000 300,000 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Natural Gas (Mcf) Oil (Mbbl)

Source: Railroad Commission of Texas, 2014.

The dramatic growth of oil and gas production has had a significant impact on Texas ports. Ports in South Texas have seen a strong uptick in their tonnage handled as they move frac sand, pipes, machinery, and other cargoes related to oil exploration and production in the Eagle Ford Shale. However, the impacts are not limited to these ports. The Port of Beaumont is handling large volumes of crude oil produced in Colorado and Wyoming and many private terminals are receiving oil and gas for refining or processing. Producers of natural gas are also looking to export the vast quantities of natural gas that is being produced and a number of new liquefaction facilities are being planned along the Texas Gulf Coast.

PANAMA CANAL EXPANSION Among all the potential factors that could affect future cargo volumes at Texas ports, the expansion of the Panama Canal has arguably generated the most interest and speculation. While the current expansion of the Panama Canal is expected to increase the volume of cargoes handled at Texas’s maritime ports, most of the public narrative has focused on handling imported goods, primarily goods imported from Asia (mostly China) and largely for consumer markets. However, this interpretation does not necessarily reflect how the Panama Canal expansion might affect Texas ports. To start, the predominance of tonnage transiting the canal flows from the Atlantic Ocean to the Pacific Ocean, as opposed to the

Pacific Ocean to the Atlantic Ocean. It should be noted that the commodity flows on this corridor are dominated by low-value bulk goods. In the case of higher value goods, such as breakbulk, RO/RO, and containerized goods, the contraflow is heavier. More specifically, among the cargoes transiting the canal from the eastern United States, exports with origins or destinations at ports in the region outweigh imports (measured by tonnage) by approximately a 2:1 margin. Gulf Coast ports, which include Texas ports and ports in other states along the Gulf of Mexico, ship approximately three-quarters of the westbound cargo transiting the Panama Canal. On the import side, Gulf ports receive approximately one-third of all imports destined for the eastern United States.

Tonnage of Cargo Transiting the Panama Canal and Originating from the Eastern United States (Long Tons), FY 2000-FY 2012

90,000

80,000

70,000

housands) T

60,000

(in 50,000

Cargo 40,000

f o 30,000

ons T 20,000

Long 10,000

2000 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2002

FY FY FY FY FY FY FY FY FY FY FY FY FY Gulf Ports South Atlantic Ports North Atlantic Ports Great Lakes Ports Other U.S. Ports

Source: Panama Canal Authority, 2013.

Tonnage of Cargo Transiting the Panama Canal and Destined for the Eastern United States (Long Tons), FY 2000-FY 2012

70,000

60,000

50,000

Thousands) 40,000 (in

rg 30,000 Ca

f o

20,000 Tons

g 10,000 Lon 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FY FY FY FY FY FY FY FY FY FY FY FY FY Gulf Ports Great Lakes Ports North Atlantic Ports South Atlantic Ports Other U.S. Ports

Source: Panama Canal Authority, 2013.

Among the cargoes handled at U.S. Gulf ports and transiting the Panama Canal, most of the export trade is with countries in Asia. However, trade with western Latin America has grown significantly. Trade between U.S. Gulf ports and countries in the Pacific grew between FY 2008 and FY 2012, while exports to Asia from Gulf ports were roughly the same in FY 2012 as they were in FY 2000.

Destinations of Cargo Transiting the Panama Canal from U.S. Gulf Ports (Long Tons), FY 2000-FY 2012

70,000

60,000 ) 50,000

ousands 40,000 Th n (i o

g 30,000 ar C of

20,000

ons 10,000 ng T Lo 0

Y 2000 Y 2001 Y 2002 Y 2003 Y 2004 Y 2005 Y 2006 Y 2007 Y 2008 Y 2009 Y 2010 Y 2011 Y 2012 F F F F F F F F F F F F F Asia South America Central America West Coast Canada Oceania United States

Source: Panama Canal Authority, 2013.

The trends for goods imported into Gulf ports through the Panama Canal are also interesting. Noticeably, the overall volume of trade peaked during FY 2006, which was likely a result of the housing bubble. However, once the bubble burst, historic trade patterns re- established themselves so that in FY 2012, the total tonnage of goods imported into the U.S. Gulf through the Panama Canal was roughly the same as it was during FY 2000. Throughout this period, Asian countries were the primary source of imports for Gulf ports, followed by the western coast of South America. Unlike exports, Central America and Mexico did not contribute a major share of the import commodities transiting the Panama Canal. It is also important to note that these data do not show a historic trend towards increasing cargo volumes with Asia through the canal, despite a greater interest in all-water services to the Atlantic Coast ports during this same period. This would imply that the Panama Canal’s added capacity will not lead to a significant and immediate increase in import volumes. On the other hand, within these aggregate trends, individual ports have seen significant changes. The Port of Houston, for example, had virtually no direct all water cargo to and from Asia, before 2000. During 2013, the volume of containerized trade on the corridor was approximately 300,000 TEUs. The Port of Houston expects this trade volume to grow further once the Panama Canal expansion is complete. However, the impacts of the Panama Canal expansion are not expected to be uniform. A few ports will likely experience noticeable increases in related cargo tonnage but many are likely to see little or no impact. Other factors that could affect the future flow of trade are the pricing of rail transportation from Pacific Coast ports, congestion within the Pacific Coast ports, and transit tolls charged by the

Panama Canal Authority. Its current toll rates are already causing some carriers to shift to the Suez Canal to remain profitable.

Tonnage of Cargo Transiting the Panama Canal and Destined for U.S. Gulf Ports (Long Tons), FY 2000-FY 2012

30,000

25,000

20,000 Thousands)

(in

o 15,000 rg Ca

f o

10,000

Tons

g 5,000

Lon 0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

FY FY FY FY FY FY FY FY FY FY FY FY FY Asia South America Central America Oceania United States Canada

Source: Panama Canal Authority, 2013.

Intermodal Containers During 2011, Texas ports handled more than two-thirds of the loaded twenty-foot equivalent units (TEUs) in the Gulf of Mexico. The Houston, Texas Customs Port, which contains the Port of Houston’s container terminals, handled almost 1.42 million loaded TEUs or 65.55 percent of the U.S. Gulf market. The next largest volume of containers was handled in the New Orleans custom district (307,121 TEUs or 14.19 percent, overall), followed by the customs districts of Gulfport, Mississippi (182,865 TEUs, 8.45 percent) and Mobile, Alabama (107,939 TEUs, 4.99 percent). Texas’s other customs districts with container ports were Freeport, which handled 51,533 (2.38 percent) during 2011 and Galveston, which handled 13,955 TEUs or 0.65 percent of the U.S. Gulf ports’ market share.

Volume of Intermodal Containers (TEUs) Handled at U.S. Gulf of Mexico Ports

2011

Rank Port District 2007 2008 2009 2010 2011 Share 1 Houston, TX 1,416,745 1,374,437 1,255,153 1,346,309 1,418,419 65.55% 2 New Orleans, LA 258,018 241,932 230,439 280,998 307,121 14.19% 3 Gulfport, MS 171,857 172,604 158,634 181,335 182,865 8.45% 4 Mobile, AL 68,379 75,310 87,546 82,629 107,939 4.99% 5 Freeport, TX 59,837 56,201 57,689 57,230 51,533 2.38% 6 Panama City, FL 42,382 37,448 31,141 29,023 33,984 1.57% 7 Tampa, FL 26,686 31,080 38,706 31,122 25,836 1.19% 8 Galveston, TX 6,228 7,718 8,542 10,922 13,995 0.65% Source: U.S. Maritime Administration, 2013.

Given that Texas is already the primary origin and destination for containerships in the Gulf of Mexico, it is generally expected that the Panama Canal expansion will have a positive overall impact on intermodal container volumes at Texas ports. However, most industry experts see it as unlikely that the largest containerships (say 12,000 to 13,000 TEU containerships) would immediately call upon the U.S. Gulf Coast. On the other hand, it is likely that ships in the 8,000 to 10,000 TEU range will traverse the canal and call on the Port of Houston. In fact, some ships in the 6,000 to 8,000 TEU range already call on the port. Although these vessels would require a 50-foot draft, if they were fully loaded, when they call on the Port of Houston, they are lighter (i.e. not utilizing the entire TEU capacity of the ship) and the vessel can be safely navigated within a 45-foot channel. It is unlikely that the largest ships that can traverse the canal will call on Texas ports because it is less economical to operate them partially loaded. But, even if the infrastructure was in place, industry experts believe the population of the Port of Houston’s hinterlands are simply too small to justify a call. On the other hand, if there was frequent and seamless intermodal rail connectivity between the Port of Houston and the Dallas-Fort Worth region, some industry experts believe the Port of Houston might reach the critical threshold to encourage the largest containerships to call. Another concurrent trend is the likely development of one or more transhipment centers in the Caribbean Sea, once the Panama Canal expansion is complete. Much akin to a hub-and-spoke system for passenger air carriers, the transhipment centers would receive the largest containerships, offload their boxes, and then transfer the containers to smaller vessels that would call upon U.S. ports. Not every container would go through a transhipment center, since there will continue to be time- sensitive cargoes that will need direct service, but some unknown share of containers is likely to be transported within this new system, which will lower operating costs for carriers but increase transit times for shippers.

Agricultural Products Over the long-term, the Panama Canal expansion is expected to have a positive impact on Texas’s agricultural exports. The expanded canal is expected to lower trans-Pacific transportation costs, due to carriers using larger bulk ships for carrying agricultural commodities to Asia. These lower costs will make Texas’s agricultural producers more likely to remain competitive with lower-cost nations like Argentina and Brazil. However, it is not anticipated that the canal expansion will sufficiently lower the price of Texas’s agricultural commodities so that lower-cost producers in other areas of the world will be unable to compete in Asian markets. As global population and income levels grow, the demand for agricultural products will increase and the Panama Canal will provide Texas producers with a cost-effective corridor for reaching these consumers. It is also possible with the Panama Canal expansion and service by larger dry bulk ships that some agricultural commodities being directed to Pacific Coast for export will be redirected to closer Gulf Coast ports. This redirection of trade would also create positive and visible benefits to Texas ports.

Liquefied Natural Gas The Panama Canal Expansion is expected to offer new opportunities for the export of natural gas produced in the United States and many in the maritime industry expect that LNG will become a major commodity transiting the canal. At present, only 8.8 percent of the world’s fleet of LNG carriers are capable of transiting the canal, due to dimensional limitations, but this figure will increase to approximately 88 percent of the fleet after the expansion. However, the canal is not the only constraint to LNG exports. Another significant constraint is the lack of liquefaction facilities needed to chill natural gas to a liquid for export. At present, there is only one approved LNG export terminal (Sabine Pass) in the U.S. Gulf, which is currently (2014) under construction and located in Cameron Parish, Louisiana (near the Texas border). According to the Federal Energy Regulatory Commission (FERC), four new LNG export terminals have been proposed in Texas. Locations in Freeport, Corpus Christi, Lavaca Bay, and Sabine Pass may all see new LNG liquefaction plants cable of preparing natural gas for export to foreign markets. There are also potential liquefaction sites in Brownsville and Ingleside, as of March, 2014. Another significant constraint that must be confronted is the legal limitations to exporting petroleum products, which requires special permits or future amendments to existing laws.

Despite the current constraints on LNG exports, the extraordinary profit potential for LNG exporters suggests that appropriate pressure will be placed upon lawmakers and regulators to allow it to happen. The table below shows the landed price of LNG around the world against the price in Lake Charles, Louisiana. The landed price of LNG in Asia and Latin America was roughly five times higher than in the United States during November 2013 and the landed price in Europe was roughly three times higher.

Landed Price of LNG at Select Locations around the World, November 2013

Location Price ($US/MMBtu) Lake Charles, LA - USA $3.15 Altamira, Mexico $16.40 Rio de Janeiro, Brazil $14.65 Bahia Blanca, Argentina $15.65 Korea $15.65 China $15.65 Japan $15.25 United Kingdom $10.66 Belgium $10.40 Source: Federal Energy Regulatory Commission, 2014.

POTENTIAL OUTCOMES AND WILDCARDS The current optimism in the Texas port industry is expected to be affirmed over the near- to medium-term. Although the U.S. economy is growing once again, its performance is likely to continue lagging behind historic trends. However, Texas’s economy, driven by its population growth, entrepreneurial environment, and the coinciding boon in the petroleum industry, is expected to fare well. The continued exploration and production of shale gas and crude oil will support the state’s economy directly and indirectly, by encouraging manufacturers who use natural gas for energy and as a feedstock to locate or expand here. However, like every energy boon before it, the current level of activity will eventually come to an end and the state’s economic activity that is based upon energy production will contract as a result. However, in the meantime, there have been very significant investments by the petrochemical industry that total in the billions of dollars, particularly along the Houston Ship Channel. These investments, which will produce plastic resins for manufacturers around the world, are expected to produce long-term jobs and wealth, even if there are downward pressures on oil prices. In addition to creating employment at the petrochemical plants, these new resins will generate a large volume of containerized export cargo that must be drayed to the Port of Houston and placed upon outgoing vessels. These activities will create additional jobs in the Houston region and drive the demand for containership capacity.

The most likely outcome of the Panama Canal Expansion on Texas ports is that trade will grow to coincide with population and economic growth. Additionally, coinciding events, such as the investment in petrochemical manufacturing along the Houston Ship Channel that was triggered by the shale gas boon in the United States, will create new cargoes that will transit the canal and that will take advantage of its expanded capacity. Additionally, LNG exports offer an example of the canal expansion providing an opportunity to open new export markets for a commodity that does not currently have adequate transportation infrastructure to effectively compete. The opportunity for significantly increasing the volume

of intermodal containers due to shifting trade routes is less certain, since there are multiple routes for containerized goods from Asia to reach the Texas market and many carriers will likely implement hub-and-spoke systems, which will allow the largest vessels to avoid the Atlantic and Gulf Coast ports, where they may find it more difficult to operate profitably. However, some cargoes will be more time-sensitive and will travel on the larger containerships, and these vessels might call on a Texas port (most likely the Port of Houston). After the Panama Canal’s expansion is complete, larger vessels calling on Texas ports will not be limited to just containerships. It is expected that bulk carriers will also begin using larger ships, which may result in equal or greater volumes of cargoes moving through Texas ports but with fewer ship calls. Regardless of the type of ship used, larger ships will likely require Texas ports to make some improvements to port infrastructure and channels to remain competitive.

Even as shippers and carriers attempt to plan for and take advantage of the Panama Canal expansion, there are various countervailing trends that work against it as a corridor. For example, the rerouting of cargo away from Pacific Coast ports to Gulf Coast ports assumes that the railroads (namely Union Pacific Railroad and the BNSF Railroad) will not alter their rates to be competitive with the expanded Panama Canal. It is widely understood that the railroads are not currently operating at their lowest possible price. Instead, the railroads will likely lower costs to compete against all-water services. On the other hand, long-distance trucking, will likely be impacted by new “Hours of Service” rules, which will increase the costs of bringing cargoes to Texas from Pacific Coast ports by truck. At the same time, the ocean carriers will likely struggle with the problem of overcapacity, due to their past purchases of large vessels, which could lower shipping costs but also create financial instability within the carrier industry.

Many of the factors that make it difficult to predict the impacts of the Panama Canal’s expansion are events that are not anticipated. One recent example is an unexpected delay in the expansion project, due to contractor underbidding. During early 2014, the contractor briefly left the work site until a compromise was reached on additional compensation. These construction delays have extended the project by roughly a year and the consequences will likely have a much further reach than just the Panama Canal Authority. Any private-sector firm or public port that has invested in infrastructure or equipment related to the Panama Canal’s expansion is at risk of paying a penalty, if they are forced to carry additional capacity they cannot use until the expanded canal opens. Other examples of unpredictable factors are the risk of drought in the United States, which affects agricultural output, and variability in the price of natural gas. Either of these events could affect the westbound flow of goods through the canal and both of them are highly relevant to Texas. Even remote geopolitical events like the crisis in Ukraine could affect the canal and Texas’s economy, if the U.S. government adopts policies to route LNG exports to Europe to counter Russia’s influence over the region, instead of to other markets with higher prices.

Ultimately, the flow of cargoes will follow where the vessels can go and this simple fact underscores the necessity for Texas ports to maintain adequate channel depth and sufficient port infrastructure to meet current and future market demand,

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Murtaugh, D. (2014, April 10). “Eagle Ford’s exports spur boom at Port of Corpus Christi.” Bloomberg. www.bloomberg.com/news/2014-04-10/eagle-ford-s-exports-spur-boom- at-port-of-corpus-christi.html

Panama Canal Authority. 2001-2013. Transit Statistics. http://www.pancanal.com/eng/op/transit- stats/index.html

Phillips, K. R. and Slijk, C. (2014, October). “Texas to remain a top state for job growth in 2014.” Southwest Economy. Federal Reserve Bank of Dallas.

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Thompson, D. (2010, July 31). “How Texas is dominating the recession.” The Atlantic: Cities. http://www.theatlantic.com/business/archive/2010/07/how-texas-is-dominating- the- recession/60721/

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Wright, B. “World trade makes Texas a global player.” The Texas Economy. Texas Comptroller of Public Accounts. Austin, TX. http://thetexaseconomy.org/business- industry/trade-logistics/articles/article.php?name=texas-world-trade

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APPENDIX B UNDERSTANDING TEXAS’S MARITIME TRADE

INTRODUCTION It is well known that Texas is the United States largest exporter of goods by value and, perhaps less well known, Texas is also the United States second largest importer. As a result, Texas’s public ports and private terminals play a critical role in the state’s and nation’s economy. This chapter will provide a better understanding of this role by analyzing trade patterns using data collected from U.S. Customs records and reported by the USACE. Specifically, this chapter will provide an overview of maritime trade flows between Texas and other domestic and foreign trading partners, based upon data from the USACE’s Waterborne Commerce of the United States statistics. Since the USACE data does not distinguish individual port authorities or private terminals, the data will be aggregated and reported at the state level.

A NATIONAL LEADER IN MARITIME TRADE Texas is among the nation’s leading states in maritime trade, handling 15.8 percent of total U.S. cargo between 2007 and 2011. This volume ranked Texas second nationally and only slightly behind Louisiana, which handled 15.9 percent of total U.S. maritime tonnage. In terms of the actual weight, Texas’s ports and private terminals handled 2.39 billion tons of maritime cargo, compared to Louisiana’s 2.41 billion tons. Texas maritime trade was more than twice the volume of third-ranked California, which handled 1.09 billion tons between 2007 and 2011.

Total Maritime Tonnage Handled by State (Short Tons), 2007-2011

Rank Commodity Name Total Tonnage Share of Total 1 Louisiana 2,412,161,000 15.91% 2 Texas 2,392,392,000 15.78% 3 California 1,091,900,000 7.20% 4 New Jersey 757,849,000 5.00% 5 Washington 581,146,000 3.83% 6 Illinois 573,302,000 3.78% 7 Florida 531,258,000 3.50% 8 Ohio 500,983,000 3.30% 9 Pennsylvania 467,624,000 3.08% 10 Kentucky 464,756,000 3.06% Subtotal Top Ten 9,773,371,000 64.45% TOTAL TONNAGE 15,164,978,000 100.00% Source: U.S. Army Corp of Engineers, 2014,

Texas ranked second among all U.S. states for tonnage shipped to foreign destinations between 2007 and 2011, with 532.0 million tons handled or 20.1 percent of the total tonnage shipped. Louisiana, which handles a large share of the nation’s agriculture exports,

ranked first overall with 579.7 million tons or almost 22.0 percent of the national total. For cargo shipped to a domestic destination Texas ranked fifth in the nation, at 179.8 million tons or approximately 5.6 percent of the national total. Louisiana was again ranked first with 579.7 million tons or 21.9 percent of total volume shipped. Following Louisiana, for total domestic tonnage shipped, were Illinois (13.0 percent), Kentucky (7.5 percent), and West Virginia (6.5 percent).

Total Tonnage of Maritime Cargo Shipped (Short Tons), 2007-2011

FOREIGN CARGO SHIPPED Rank Commodity Name Total Tonnage Share of Total 1 Louisiana 579,684,000 21.86% 2 Texas 532,025,000 20.06% 3 California 295,079,000 11.13% 4 Washington 247,191,000 9.32% 5 Virginia 214,001,000 8.07% 6 New Jersey 91,897,000 3.47% 7 Florida 88,833,000 3.35% 8 Maryland 79,199,000 2.99% 9 Georgia 78,439,000 2.96% 10 Oregon 77,095,000 2.91% TONNAGE TOP TEN 2,283,443,000 86.12% TOTAL TONNAGE 2,651,871,000 100.00%

DOMESTIC CARGO SHIPPED Rank Commodity Name Total Tonnage Share of Total 1 Louisiana 449,149,000 13.99% 2 Illinois 418,598,000 13.04% 3 Kentucky 241,961,000 7.53% 4 West Virginia 210,152,000 6.54% 5 Texas 179,827,000 5.60% 6 Alaska 171,724,000 5.35% 7 New Jersey 163,697,000 5.10% 8 Minnesota 134,916,000 4.20% 9 Wisconsin 103,593,000 3.23% 10 Michigan 102,412,000 3.19% Tonnage Top Ten 2,176,029,000 67.77% TOTAL TONNAGE 3,211,280 100.00% Source: U.S. Army Corp of Engineers, 2014,

Texas’s ports and terminals led the nation for the tonnage of foreign cargo received between 2007 and 2011, at 1.25 billion tons. This volume accounted for more than one-quarter (26.7 percent) of the total foreign tonnage handled in the United States. Texas received more than twice the foreign tonnage of California (605.5 million tons) and roughly 2.5 times the volume of foreign cargo received at Louisiana’s ports. Texas’s share of domestic cargo received was lower, however, roughly one-tenth (124.9 million tons) of its received foreign cargo volume. The state ranked eighth overall with Louisiana ranked first with 625.7 million tons.

Total Tonnage of Maritime Cargo Received (Short Tons), 2007-2011

FOREIGN CARGO RECEIVED Rank Origin Total Tonnage Share of Total 1 Texas 1,249,868,000 26.68% 2 California 605,535,000 12.92% 3 Louisiana 531,970,000 11.35% 4 New Jersey 358,771,000 7.66% 5 Other 263,447,000 5.62% 6 Pennsylvania 177,945,000 3.80% 7 Florida 164,906,000 3.52% 8 Washington 113,674,000 2.43% 9 New York 107,068,000 2.29% 10 Mississippi 106,715,000 2.28% SUBTOTAL 3,679,899,000 78.55% TOTAL TONNAGE 4,685,499,000 100.00%

DOMESTIC CARGO RECEIVED Rank Origin Total Tonnage Share of Total 1 Louisiana 625,598 19.48% 2 Ohio 284,849 8.87% 3 Florida 231,873 7.22% 4 Indiana 228,886 7.13% 5 Tennessee 152,979 4.76% 6 Pennsylvania 141,344 4.40% 7 Kentucky 130,306 4.06% 8 Texas 124,945 3.89% 9 Washington 113,879 3.55% 10 Michigan 103,356 3.22% SUBTOTAL 2,138,015 66.58% TOTAL TONNAGE 3,211,280 100.00% Source: U.S. Army Corp of Engineers, 2014,

An important aspect of Texas’s maritime trade is the volume of its intrastate movements. Texas leads the nation in the total volume of intrastate maritime cargo handled at 305.7 million tons between 2007 and 2011. This high volume of intrastate trade (as well as maritime trade shipped to and received from other states) is significant because every ton of cargo handled on Texas’s waterways reduces or eliminates the need to utilize the state’s road, rail, or pipeline networks. As a result, Texas’s coastwise maritime trade plays a key role in managing congestion and reduces the need to build new transportation infrastructure. Additionally, many of the cargoes moved on water are hazardous materials and maritime vessels provide the safest mode of transportation.

Total Intrastate Maritime Tonnage Handled by State (Short Tons), 2007-2011

Rank U.S. State Total Tonnage Share of Total 1 Texas 305,726,000 21.76% 2 Louisiana 225,760,000 16.07% 3 Kentucky 92,489,000 6.58% 4 Alabama 71,886,000 5.12% 5 California 66,598,000 4.74% 6 Pennsylvania 59,631,000 4.24% 7 Illinois 58,532,000 4.17% 8 West Virginia 55,264,000 3.93% 9 Michigan 50,298,000 3.58% 10 Washington 48,847,000 3.48% 1,035,031,000 73.67% TOTAL TONNAGE 1,405,050,000 100.00% Source: U.S. Army Corp of Engineers, 2014,

Texas’s Foreign Maritime Trade Texas’s maritime exports between 2007 and 2011 totalled 533.4 million tons.7 The top ten export markets received just over half (50.3 percent) of those goods or 268.3 million tons. Mexico was Texas’s most important maritime export trading partner, receiving 87.2 million tons during this period or 16.4 percent of the total tonnage handled. Brazil was the second largest trading partner with 38.3 million tons and the Netherlands ranked third with 30.2 million tons. The remaining countries of the top ten were dispersed around the world in Europe, Latin America, Asia, and Africa.

7 The total volumes of export and import trade reported in the first four tables of this appendix are slightly higher than the values reported in the remaining tables. Both sets of tables are based upon the same data source from the USACE, but the USACE reports the data differently between the two products, which accounts for the discrepancies.

Texas’s Total Maritime Export Trade by Trading Partner (Short Tons), 2007-2011

Rank Destination Total Tonnage Share of Total 1 Mexico 87,209,552 16.35% 2 Brazil 38,268,632 7.18% 3 Netherlands 30,208,748 5.66% 4 China 18,377,399 3.45% 5 Nigeria 17,874,918 3.35% 6 Colombia 16,174,017 3.03% 7 Spain 15,798,258 2.96% 8 Italy 15,556,994 2.92% 9 Chile 14,690,074 2.75% 10 Panama 14,200,562 2.66% Subtotal Top Ten 268,359,154 50.31% Grand Total 533,334,209 100.00% Source: U.S. Army Corp of Engineers, 2014.

The next table shows which countries are Texas’s primary sources of maritime imports, which are less diversified than the recipients the state’s exports. The top ten countries that shipped Texas’s imports sent over 900 million tons of cargo or almost 72.0 percent of the total 1.2 billion tons of foreign import cargo handled at Texas ports between 2007 and 2011. Mexico is Texas’s largest exporter with 249.5 million tons of cargo imported between 2007 and 2011. Overall, Mexico accounted for almost one-fifth of all of Texas’s maritime imports. The “unknown” category ranked second with 207.6 million tons of cargo. This category includes cargoes that originated on the high seas. While it is not intuitive that a large volume of cargo handled at Texas ports would originate on the high seas, port calls by lightering tankers are a common occurrence.8 Given that 94.5 percent of the cargo in this category is crude oil and that 93.9 percent of that cargo was handled on the high seas of the Gulf of Mexico, this is a plausible explanation of the data. Venezuela was the third largest exporter to Texas ports, sending 175.1 million tons of cargo, which accounted for almost 14.0 percent of Texas’s total maritime imports. Among the top ten exporters to Texas between 2007 and 2011, crude oil accounted for the majority of their exports to the state (in terms of tonnage), with the exception of Brazil and Trinidad. Overall, imports of crude oil accounted for 85.6 percent of the imports from Texas’s top ten exporters between 2007 and 2011. When all maritime imports from all nations are accounted, crude oil was 71.8 percent of the total volume of imports. Fortunately for Texas highways, the vast majority the state’s petroleum cargo is handled by Texas’s maritime and pipeline networks, until the final

8 Lightering tankers are the vessels that off-load crude oil from the very large crude carriers (VLCC) that bring their cargo to Texas from around the world. Because the channel drafts at Texas ports cannot accommodate large oil tankers, the cargoes are off-loaded onto smaller tankers in deep water and then brought to shore.

product is distributed by truck. In fact, a significant share never goes inland from the Texas Coast, either as a raw material or a finished product.

Texas’s Total Maritime Import Trade by Trading Partner (Short Tons), 2007-2011

Rank Origin Total Tonnage Share of Total Percent Crude Oil 1 Mexico 249,524,141 19.93% 86.82% 2 Unknown 207,658,628 16.59% 94.49% 3 Venezuela 175,145,628 13.99% 93.05% 4 Saudi Arabia 60,068,774 4.80% 94.92% 5 Algeria 48,267,257 3.86% 80.78% 6 Nigeria 42,592,239 3.40% 91.55% 7 Colombia 36,896,675 2.95% 86.45% 8 Brazil 33,310,055 2.66% 30.74% 9 Trinidad 26,333,340 2.10% 26.52% 10 Russia 21,385,508 1.71% 53.68% Subtotal Top Ten 901,182,245 71.98% 85.60% Grand Total 1,252,044,991 100.00% 71.76% Source: U.S. Army Corp of Engineers, 2014.

Texas’s Domestic Maritime Trade Despite the large volume of ship and barge traffic along the Texas Coast, it is somewhat surprising that less than 20 percent of the trade originating from Texas had a destination in another U.S. state between 2007 and 2011. More than one-half (51.5 percent) of goods shipped from Texas ports had a foreign destination and approximately 30 percent of shipped goods were destined to ports within Texas. Among U.S. states, Louisiana and Florida were the most frequent destinations of cargoes shipped from Texas, receiving 6.9 percent and 5.4 percent of shipped goods, respectively. Alabama received just over 1 percent of goods shipped from Texas and all other U.S. states and territories have less than 1 percent of the total market share.

Destinations of Cargoes Handled at Texas Ports, 2007-2011

Rank Destination Total Tonnage Share of Total 1 Foreign 523,898,621 51.48% 2 Texas 305,726,286 30.04% 3 Louisiana 69,766,186 6.86% 4 Florida 55,150,710 5.42% 5 Alabama 10,324,342 1.01% 6 Canada 8,126,513 0.80% 7 Illinois 5,373,414 0.53% 8 Indiana 4,467,480 0.44% 9 South Carolina 3,847,010 0.38% 10 Arkansas 3,098,605 0.30% Subtotal Top Ten 989,779,167 97.27% TOTAL TONNAGE 1,017,578,442 100.00% Note: Canada is the only country identified separately in this database. Source: U.S. Army Corp of Engineers, 2014,

The origin of goods received at Texas ports had an even smaller contribution from other U.S. states. Almost three-quarters of cargo received at Texas ports had a foreign origin. Goods originating from other Texas ports accounted for 18.2 percent of the total volume of cargo received. Louisiana was Texas’s largest domestic trading partner with 81.1 million tons or 4.8 percent of the total tonnage received between 2007 and 2011. Texas ports next largest domestic trading partner was Alabama with 0.46 percent 7.7 million tons, behind Canada’s 9.2 million tons.

Origins of Cargoes Handled at Texas Ports, 2007-2011

Rank Commodity Name Total Tonnage Share of Total 1 Foreign 1,240,694,330 73.83% 2 Texas 305,726,286 18.19% 3 Louisiana 81,051,176 4.82% 4 Canada 9,173,482 0.55% 5 Alabama 7,724,727 0.46% 6 Mississippi 7,424,252 0.44% 7 Virgin Islands 6,319,537 0.38% 8 Illinois 4,819,165 0.29% 9 Missouri 2,571,568 0.15% 10 Kentucky 2,228,563 0.13% Subtotal Top Ten 1,667,733,086 99.24% TOTAL TONNAGE 1,680,539,420 100.00% Note: Canada is the only country identified separately in this database. Source: U.S. Army Corp of Engineers, 2014,

Trade by Commodity More than 1.0 billion tons of goods originated from Texas ports and private terminals between 2007 and 2011 but there was relatively little diversity in these commodities. More than one-half of the total tonnage shipped from Texas ports during this period (or approximately 570.9 million tons) was petroleum products (such as gasoline, diesel, lubricants, etc.). Chemicals (but not fertilizers) were the second largest commodity group with 251.8 million tons (24.8 percent of the total). Food and food products were the third largest commodity shipped at 90.5 million tons or 8.9 percent of all goods. Collectively, these top three goods accounted for almost 90 percent of all maritime goods shipped from Texas.

Total Tonnage of Maritime Goods Originating from Texas, 2007-2011

Rank Commodity Name Total Tonnage Share of Total 1 Petroleum products 570,932,642 56.11% 2 Chemicals, excluding fertilizers 251,823,720 24.75% 3 Food and food products 90,509,300 8.89% 4 Crude petroleum 29,296,075 2.88% 5 Unknown or not elsewhere classified products 16,086,390 1.58% 6 Manufactured goods 15,721,764 1.55% 7 Sand, gravel, shells, clay, salt, and slag 9,559,562 0.94% 8 Non-ferrous ores and scrap 9,206,504 0.90% 9 Primary metal products 7,873,641 0.77% 10 Iron ore, iron, and steel waste and scrap 7,671,319 0.75% 11 Chemical fertilizers 4,505,661 0.44% 12 Primary non-metal products 2,427,600 0.24% 13 Coal, lignite, and coal coke 1,281,663 0.13% 14 Lumber, logs, wood chips, and pulp 682,601 0.07% TOTAL TONNAGE 1,017,578,442 100.00% Source: U.S. Army Corp of Engineers, 2014

The volume of maritime goods received by Texas’s ports and private terminals was 65 percent larger than the volume that was shipped out. More than 900 million tons of crude oil was shipped to Texas, as was 425.6 million tons of petroleum products. The third largest category was chemicals, excluding fertilizers, which accounted for almost 8.8 percent of the incoming goods handled. Together, these three commodities accounted for approximately 88.4 percent of the maritime goods received at Texas’s ports and private terminals. It is important to note that while Texas receives more goods than it ships, which implies a state trade imbalance, much of this tonnage enters into the petroleum refining process and are rendered into gasoline, diesel, jet fuel, and other petroleum products that are sold domestically and internationally.9 The refining process is a value-added activity that generates wealth for Texas, which is only possible due to imports of feedstock. Similarly, chemicals are also imported to use in the production of more sophisticated chemicals or products, which are then exported. In short, the importing of goods into Texas ports is critical to the state’s economy and provides the necessary inputs for its value added activities that generate wealth for the state rather than reducing it.

9 According to the U.S. Energy Information Administration, one barrel of crude oil (42 gallons) makes 19 gallons of gasoline, 11 gallons of diesel, 4 gallons of jet fuel, 2 gallons of liquefied petroleum gas, and 9 gallons of other products. The sum of products exceeds the input of oil because other inputs are added during the refining process. http://www.eia.gov/energyexplained/index.cfm?page=oil_refining

Total Tonnage of Maritime Goods Destined to Texas, 2007-2011

Rank Commodity Name Total Tonnage Share of Total 1 Crude Petroleum 911,031,261 54.21% 2 Petroleum Products 425,623,890 25.33% 3 Chemicals excluding Fertilizers 148,828,955 8.86% 4 Primary Metal Products 44,954,790 2.68% 5 Non-Ferrous Ores and Scrap 42,374,530 2.52% 6 Sand, Gravel, Shells, Clay, Salt, and Slag 35,324,652 2.10% 7 Unknown and Not Elsewhere Classified Products 21,078,920 1.25% 8 Primary Non-Metal Products 14,323,212 0.85% 9 Manufactured Goods 13,057,488 0.78% 10 Food and Food Products 12,985,850 0.77% 11 Chemical Fertilizers 6,608,981 0.39% 12 Lumber, Logs, Wood Chips, and Pulp 2,799,121 0.17% 13 Iron Ore, Iron, and Steel Waste and Scrap 1,072,879 0.06% 14 Coal, Lignite, and Coal Coke 474,891 0.03% TOTAL TONNAGE 1,680,539,420 100.00% Source: U.S. Army Corp of Engineers, 2014,

TEXAS’S MARITIME TRADE WITH MEXICO While it is common knowledge that Mexico is Texas’s largest trading partner, the importance of this relationship extends beyond surface trade (i.e. truck and rail shipments) along the Texas-Mexico border. Mexico was also Texas’s most important maritime trading partner between 2007 and 2011. There are 40 commercial cargo ports in Mexico along the Gulf of Mexico, the Caribbean, and the Pacific Ocean. More than half of Mexico’s ports handled cargo with an origin or destination in Texas between 2007 and 2011, although the vast majority of the cargo was handled at a small number of ports. This section will provide a brief overview of maritime cargo flows between Texas and Mexico.

Origins and Destinations of Texas’s Export Trade with Mexico Between 2007 and 2011, 87.2 million tons of maritime cargo was exported to Mexico. The ten Mexican ports with the most trade accounted for 98.5 percent of the total and the top four ports accounted for 83.5 percent. The Mexican port of Tuxpan, located in the Mexican state of Veracruz was the recipient of the largest share of Texas’s maritime exports (30.7 percent), followed by the Port of Veracruz (20.9 percent), Pajaritos (also in the city of Coatzacoalcos, Veracruz with 17.4 percent). Abryos, a Pacific Coast port, was the fourth largest recipient of Texas’s exports to Mexico and received 12.6 million tons of cargo, while two other Pacific Coast ports (Lazaro Cardenas and Manzanillo) rounded out the top 10

destinations for Texas’s maritime exports but collectively only accounted for 1.6 percent of the total market.

Texas’s Total Maritime Export Trade by Mexican Port (Short Tons), 2007-2011

Rank Mexican Port Total Tonnage Share of Total 1 Tuxpan 26,791,673 30.72% 2 Veracruz 18,223,076 20.90% 3 Pajaritos 15,202,312 17.43% 4 Abryos 12,606,441 14.46% 5 Coatzacoalcos 7,245,132 8.31% 6 Progreso 2,489,829 2.85% 7 All Other Mexico East Coast Region Ports 1,050,643 1.20% 8 Altamira 914,532 1.05% 9 Lazaro Cardenas 715,534 0.82% 10 Manzanillo 680,681 0.78% Subtotal Top Ten 85,919,853 98.52% Grand Total 87,209,552 100.00% Source: U.S. Army Corp of Engineers, 2014.

The next table shows that Texas’s exports to Mexico were highly concentrated in refined petroleum products, chemicals, and agricultural products. The top 10 export commodities accounted for 98.6 percent of all goods exported to Mexico. Refined fuels, such as gasoline and jet fuel, accounted for slightly more than one-third of exports, while chemicals accounted for more than one-fifth of exports and the combined volume of agricultural products was 16.4 percent of the total.

Texas’s Maritime Exports to Mexico by Commodity, 2007-2011

Rank Commodity Name Total Tonnage Share of Total 1 Gasoline, Jet Fuel, Kerosene 29,161,978 33.44% 2 Other Chemicals and Related Products 18,565,939 21.29% 3 Distillate, Residual & Other Fuel Oils; Lube Oil & Grease 11,394,418 13.07% 4 Petroleum Pitches, Coke, Asphalt, Naptha and Solvents 8,186,341 9.39% 5 Corn 5,737,228 6.58% 6 Barley, Rye, Oats, Rice and Sorghum Grains 4,651,671 5.33% 7 Wheat 3,927,595 4.50% 8 Petroleum Products NEC 3,026,287 3.47% 9 Other Agricultural Products; Food and Kindred Products 672,611 0.77% 10 Iron Ore and Iron & Steel Waste & Scrap 634,723 0.73% Subtotal 85,958,791 98.57% Total All Commodities 87,209,552 100.00% Source: U.S. Army Corp of Engineers, 2014,

Texas ports imported almost 250 million tons of cargo from Mexican ports between 2007 and 2011. Sixty percent of this cargo originated at the Cayo Arcas Terminal, which is an offshore oil terminal approximately 84 miles into the Bay of Campeche. The second and third largest origins were the Port of Pajaritos located in Coatzacoalcos and the Port of Coatzacoalcos, which are both located in the Mexican state of Veracruz. The Port of Cozumel Island was the origin of 15.5 million tons (6.2 percent of total tonnage) of maritime goods from Mexico, while the Port of Dos Bocas in the Mexican state of Tabasco, exported 13.5 million tons (5.4 percent of total imports).

Texas’s Maritime Trade with Mexico’s Ports (Short Tons), 2007-2011

Rank Mexican Port Total Tonnage Share of Total 1 Cayo Arcas 149,810,805 60.04% 2 Pajaritos 32,108,273 12.87% 3 Coatzacoalcos 23,716,432 9.50% 4 Cozumel Island 15,466,698 6.20% 5 Dos Bocas 13,542,712 5.43% 6 All Other Mexico East Coast Region Ports 9,446,151 3.79% 7 Altamira 1,833,484 0.73% 8 Veracruz 1,710,292 0.69% 9 Lazaro Cardenas 922,518 0.37% 10 Acapulco 222,657 0.09% Subtotal 248,780,022 99.70% Grand Total 249,524,141 100.00% Source: U.S. Army Corp of Engineers, 2014.

Almost 87 percent of Texas’s maritime imports from Mexico, between 2007 and 2011, consisted of crude oil. The next largest commodity was sand, gravel, stone, rock, limestone and soil, which collectively made up approximately 6.2 percent of the total volume of imports. The third and fourth ranked maritime imports were fuels and distillates (like diesel), which together accounted for roughly 5.0 percent of all imports. Collectively, these four groups of commodities accounted for 98.0 percent of all goods imported from Mexico between 2007 and 2011.

Texas’s Maritime Imports from Mexico (Short Tons), 2007-2011

Rank Texas Waterway Total Tonnage Share of Total 1 Crude Petroleum 216,626,239 86.82% 2 Sand, Gravel, Stone, Rock, Limestone, Soil, etc. 15,388,371 6.17% 3 Gasoline, Jet Fuel, Kerosene 8,192,495 3.28% 4 Distillate, Residual & Other Fuel Oils; Lube Oil & Grease 4,334,951 1.74% 5 Primary Iron and Steel Products (Ingots ,Bars ,Rods ,etc.) 1,717,674 0.69% 6 Other Chemicals and Related Products 1,169,547 0.47% 7 Petroleum Pitches, Coke, Asphalt, Naptha and Solvents 1,134,301 0.45% 8 Other Agricultural Products; Food and Kindred Products 327,453 0.13% 9 Building Cement & Concrete; Lime; Glass 175,435 0.07% 10 Petroleum Products NEC 114,779 0.05% Subtotal Top Ten 249,181,245 99.86% Total All Commodities 249,524,141 100.00% Source: U.S. Army Corp of Engineers, 2014,

CONCLUSIONS The review of maritime trade data provided in this chapter demonstrates the prominent role of the state’s public ports and private terminals in the national economy. Texas’s maritime activities have contributed greatly to the state’s wealth, economic output, employment, and worker income. This role is especially true within the petroleum and chemical industries, where raw and intermediate products are imported and then refined or processed into products that are shipped to the remainder of the United States and throughout the world. However, within the strength in these industries, there is also a strong reliance. A long-term movement towards a more diversified commodity mix would make Texas’s maritime system more resilient. Texas’s well-developed intrastate maritime network (i.e. its ports, ship channels, and the GIWW) play an important role in preventing greater congestion on Texas’s highways and the state’s rail network. Additionally, the movement of hazardous materials on maritime vessels has created fewer safety risks to the general public. As mentioned earlier in this report, the GIWW will be discussed in detail by a companion document that is scheduled to be released by TxDOT in mid-2014. Finally, the trade analysis in this chapter demonstrated that Mexico’s importance to the Texas economy extends well beyond trade along the Texas-Mexico border. Mexico is Texas’s largest maritime trading partner for both imports and exports, providing critical feedstock into the state’s petrochemical industry and a market for agricultural products. As Mexico opens its petroleum industry to foreign investment, there are prospects for an even stronger relationship between the two economies.

SOURCES

U.S. Army Corp of Engineers. 2007-2011. Foreign Cargo. http://www.navigationdatacenter.us/data/data1.htm

U.S. Army Corp of Engineers. 2007-2011. State to State and Region to Region Commodity Tonnages. http://www.navigationdatacenter.us/data/data1.htm

U.S. Army Corp of Engineers. 2007-2011. Waterborne Commerce of the United States. http://www.navigationdatacenter.us/data/data1.htm

U.S. Army Corp of Engineers. 2007-2011. State Tonnages. http://www.navigationdatacenter.us/data/data1.htm

APPENDIX C PORT PROFILES

PORT AT-A-GLANCE Orange County Port of Orange • Orange, TX Navigation & Port District 1201 Childers Road Legal Name: Orange County Navigation and Port District Draft: Deep Orange, Texas 77632 (409) 883-4363 www.portoforange.com 2011 Cargo Tonnage: 94,504 (All commodity types in tons) Port Director Gene Bouillion Annual Economic Impact: $1.9 million (in 2004) Commissioners Background Jerry Hughes President

The port is located on the Sabine-Neches waterway and is linked to the “Golden Jimmy Smith Triangle” ports which include the Port of Port Arthur, Beaumont and Orange – an area Vice President that has become strategically more important to Texas ports growth since 2003. It has handled an annual tonnage of around 800,000 since 2001 and traditionally has acted Keith Wallace as a successful landlord port, complementing activities at larger ports on the Sabine- Secretary/Treasurer Neches channel. It is also used for lay berthing. John Young

Barbara Winfree

Governing Body

Port of Orange is a navigation district and political subdivision of the state of Texas. The port is governed by 5 commissioners, elected on staggered 4-year terms by voters in the district.

Revised 08/2013

Assets Orange County • The Port is the mechanical, electrical repair, and fabrication of ocean-going Navigation & Port District barges of the type used to service deep water Gulf oil rigs 1201 Childers Road • A total of 2,300 feet of docking space at a depth of 30 feet Orange, Texas 77632 • Four (4) berths with a grain elevator and bagging facility (409) 883-4363 • Eight (8) warehouses www.portoforange.com • Used by MARAD to service, repair, and maintain the military ready reserve fleet Port Director Gene Bouillion

Commissioners Jerry Hughes President

Jimmy Smith Vice President

Keith Wallace Secretary/Treasurer

John Young

Barbara Winfree

Governing Body

Port of Orange is a navigation district and political subdivision of the state of Texas. The port is governed by 5 commissioners, elected on staggered 4-year terms by voters in the district.

Revised 08/2013

PORT AT-A-GLANCE 221 Houston Avenue Port of Port Arthur • Port Arthur, Texas Port Arthur, Texas (409) 983-2011 www.portofportarthur.com Legal Name: Port of Port Arthur Navigation Draft: Deep

District of Jefferson County, Texas Executive Port Director Floyd Gaspard Secretary/Treasurer of the US Port Ranking: 14th in total tonnage (U.S. Customs Port Ranking) Board

Commissioners 2011 Total Tonnage: 30.3 tons¹ 1,183 Linda Turner Spears President

John Comeaux Vice President Vessel Calls (annual)

including barge/tug calls Morris Albright

Raymond Johnson

Mark Underhill Annual Economic Impact: $128.0 (in millions) Of that, $11.1 million went to state and local taxes and $31.6 million went to custom Governing Body receipts Port of Port Arthur is a Top Commodities political subdivision of the state of Texas. A Port Imports Exports Commission composed of Steel Slabs Forest Products five at-large elected commissioners governs the Forest Products Petroleum Coke Port. Project Cargo Steel Pipe

Misc. Steel Project Cargo

Jobs Jobs Total

Direct 1,509

Induced 1,132

Indirect 192

Related 3,093

1. www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_57.html

PORT PROFILE 221 Houston Avenue Port of Port Arthur • Port Arthur, TX Port Arthur, Texas (409) 983-2011 The Port of Port Arthur is situated directly on the Gulf Intracoastal Waterway (GIWW) www.portofportarthur.com and only 19 miles from the Gulf of Mexico. Port Arthur’s strategic location on the GIWW Executive Port Director provides easy barge transportation on the U.S. inland waterway system to cities along the Mississippi, Ohio, Arkansas, and Tennessee, Missouri and Illinois Rivers plus its Floyd Gaspard many tributaries. Panamex size vessels began taking advantage of the ports new 2000 Secretary/Treasurer of the Board terminal expansion for lay berthing. Port Arthur has emerged as a major break-bulk port

for forest products, project cargo, steel and military redeployments. Port Arthur’s Commissioners principal trading partners include South America, the European Continent, United Linda Turner Spears Kingdom, Mediterranean Area, Middle East and Mexico. President

Assets John Comeaux • Two Class 1 Rail lines – Kansas City Southern and Union Pacific Vice President • Contains 3,104 feet of docks • 48,000 square meters of shed storage and over 68,000 square meters of open Morris Albright asphalt-paved storage • The Port is served by three wharf rail tracks with 150-car capacity, two shed tracks Raymond Johnson with 80-car capacity and six storage yard tracks with 140-car capacity Mark Underhill

Governing Body

Port of Port Arthur is a political subdivision of the state of Texas. A Port Commission composed of five at-large elected commissioners governs the Port.

Connectivity • Direct access to interstate highway system • Rail and truck service to all points within the United States, Canada and Mexico. • Barge service to cities along the Gulf Intracoastal Waterway and the Mississippi, Missouri, Illinois, Ohio and Tennessee River Systems. 1. www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_01_57.html

PORT AT-A-GLANCE 1225 Main Street Port of Beaumont • Beaumont, Texas Beaumont, TX 77704 (409) 835-5367 Legal Name: Port of Beaumont Navigation District Draft: Deep www.portofbeaumont.com Of Jefferson County, Texas Port Director & CEO

th David C. Fisher US Port Ranking: 7 in total tonnage (U.S. Customs Port Ranking)

Commissioners Short Tonnage (Millions) C.A. “Pete” Sheldon 400 Foreign President At-Large Trade (46.7) Lee E. Smith Domestic Vice President Trade (22.6) Vessel Calls (annual) 0 20 40 60 including barge/tug calls Georgina Guillory

Total Trade: 69,483,539 short tons Secretary-Treasurer

Pat Anderson

Louis M. Broussard, Jr. Annual Economic Impact: $122.2 million $11.6 million in state and local taxes and $23.3 million in federal taxes Governing Body Port of Beaumont is a Top Commodities navigation district and political subdivision of the state of Texas. The port is Imports Exports governed by six Forest Products Bulk Grain commissioners, elected on staggered six-year terms by Steel Forest Products voters in the district. Project Cargo Potash Principal Trading Aggregate Project Cargo Partners

Brazil, Canada, Iraq, Russia, China, Chile, Peru, Norway Jobs and Nigeria

Service Area Jobs Total Midwest and Western

Direct 970 United States, Texas, Mexico and Canada

Induced 730

Indirect 165

Related 1,865

Revised 08/2013

PORT PROFILE 1225 Main Street Port of Beaumont • Beaumont, TX Beaumont, TX 77704 (409) 835-5367 The Port of Beaumont is a large cargo port located approximately 84 miles east of www.portofbeaumont.com Houston in Jefferson County. It is accessible from the Gulf Intracoastal Waterway through the Sabine-Neches ship channel. One major advantage of the location of the Port Director & CEO Port of Beaumont is that it is connected with the U.S. inland waterways. Using these David C. Fisher paths, water-transported cargo traveling through the Port of Beaumont can be delivered to Minneapolis, Chicago, St. Louis, Kansas City, Louisville, Omaha, and Commissioners Memphis. The Port of Beaumont includes layberths for ships of the Maritime C.A. “Pete” Sheldon Administration as well as various facilities to accommodate the international and U.S. President At-Large products that pass through the port. Lee E. Smith Vice President Assets  Port facilities include more than 620,000 square feet of covered storage space Georgina Guillory alongside nine berths and more than 80 acres of open-air storage Secretary-Treasurer  Roll-On/Roll-Off Ramp, immediately downstream from Harbor Island Marine Terminal Pat Anderson  3.5-million-bushel-capacity grain elevator and dry bulk cargo facilities  Rail-to-ship bulk transfer facility; ship loading rate: 10,000 metric tons/day Louis M. Broussard, Jr. Connectivity  Connected with the U.S. inland waterways Governing Body Port of Beaumont is a  Three Class 1 railroads – BNSF, Kansas City Southern, Union Pacific navigation district and  Connected to five (5) highways political subdivision of the state of Texas. The port is governed by six commissioners, elected on staggered six-year terms by voters in the district.

Principal Trading Partners Brazil, Canada, Iraq, Russia, China, Chile, Peru, Norway and Nigeria

Service Area Midwest and Western United States, Texas, Mexico and Canada

Revised 08/2013

PORT AT-A-GLANCE Port of Houston • Houston, Texas 111 East Loop North Houston, Tx 77029 www.portofhouston.com Legal Name: Port of Houston Authority Draft: Deep (713) 670-2400

US Port Ranking: 1st in U.S. in foreign waterborne tonnage and 2nd in U.S. in total Port Executive Director tonnage¹ (U.S. Customs Ports Ranking) Roger Guenther

Commission Members

Foreign Trade in TEUs in Short Tonnage (Millions)² 208,000ᶾ Janiece M. Longoria Chairman Import John D. Kennedy 9.2 13.7 Export Dean E. Corgey

0 10 20 30 Clyde Fitzgerald Theldon R. Branch, III Total Trade Value: 22.9 MIL tons valued at $53.5 BIL Barge and Vessel Calls Stephen H. DonCarolos (annual) Roy D. Mease

Governing Body Annual Statewide Economic Impact: $178.5 BIL Governed by a board of seven commissioners Direct Jobs: 53,952 | Induced Jobs: 71,065 | Indirect Jobs: 49,835 and selected by governmental entities within Harris County, the Top Commodities port commissioners set (In ranking order) policy and provide guidance to the Port Exports Imports Authority staff. Commissioners serve Resins & Plastics Food & Drink staggered two-year Chemicals & Minerals Hardware & Construction Material terms. Machinery, Appliances & Electronics Machinery, Appliances & Electronics Food & Drink Steel & Metals Automotive Chemicals & Minerals Steel & Metal Retail Consumer Goods Fabrics Incl. Raw Cotton Furniture

1. Port of Houston Authority Website: http://www.portofhouston.com/about-us/overview/ 2. Port of Houston Foreign Trade Containerized Cargo Statics Report, 2013, http://www.portofhouston.com/static/gen/business- development/Origination/FTS_Containerized_Cargo_2013.pdf 3. http://www.portofhouston.com/about-us/overview/ 4. http://www.portofhouston.com/about-us/overview/

PORT PROFILE Port of Houston • Houston, Texas 111 East Loop North Houston, Tx 77029 The Port of Houston is a 25-mile-long complex of diversified public and private facilities www.portofhouston.com located just a few hours by ship from the Gulf of Mexico. The port is consistently (713) 670-2400 ranked 1st in the United States in foreign waterborne tonnage; 1st in U.S. imports; 1st in U.S. export tonnage and 2nd in the U.S. in total tonnage. It is also the nation’s leading Port Executive Director breakbulk post, handling 65 percent of all major U.S. project cargo. The Port of Roger Guenther Houston Authority is the sponsor of the Houston Ship Channel which is 45 feet deep and 530 feet wide. Commission Members

The Port of Houston is made up of the public terminals owned, managed and leased by Janiece M. Longoria the Port of Houston Authority, and the 150-plus private industrial companies along the Chairman John D. Kennedy 52-mile long Houston Ship Channel. Dean E. Corgey Clyde Fitzgerald Theldon R. Branch, III Stephen H. DonCarolos Roy D. Mease

Governing Body Governed by a board of seven commissioners and selected by governmental entities within Harris County, the

port commissioners set

policy and provide guidance to the Port Authority staff. Commissioners serve staggered two-year terms.

Assets 111 East Loop North • Home to a $15 billion petrochemical complex, the largest in the nation and Houston, Tx 77029 second largest in the world. www.portofhouston.com • Largest Texas port with 46% of market share by tonnage and 95% market (713) 670-2400 share in containers by total TEUs in 2013 Port Executive Director Connectivity Roger Guenther • The Port is located in the 4th largest city in the US. • The Port has access to numerous local and state highways as well as two major Commission Members interstate corridors. • There are 3 Class 1 Railroads Janiece M. Longoria • The Port is home to the most extensive port terminal railroad, the Port Terminal Chairman Railroad Association (PTRA) that operates along the Houston Ship Channel. The John D. Kennedy PTRA serves more than 220 customers from seven rail yards and maintains Dean E. Corgey Clyde Fitzgerald 154 miles of track and 20 bridges. Theldon R. Branch, III • The Port is in the Gulf Coast Rail District which works to address rail congestion Stephen H. DonCarolos in the Houston region. Roy D. Mease

Potential Improvements to Infrastructure Governing Body • The Port is beginning work on a channel improvement project at the Port Governed by a board of Authority's two container terminals that will deepen the channels from 40 feet seven commissioners to 45 feet, making it match the depth of the Houston Ship Channel. and selected by o The project will also widen or realign the channels by up to 100 feet to governmental entities better accommodate larger ships. within Harris County, the o The Port Authority is funding the $68 million project at its sole cost to port commissioners set ensure the channel improvements are available as soon as possible to policy and provide better accommodate larger container ships in preparation of the guidance to the Port opening of the expanded Panama Canal in 2016. Authority staff. Commissioners serve

staggered two-year terms.

PORT AT-A-GLANCE 123 Rosenberg Ave. Galveston, TX 77550 Port of Galveston • Galveston, Texas www.portofgalveston.com (409) 766-6105 Legal Name: Board of Trustees of the Galveston Wharves Draft: Deep Port Director US Port Ranking: 4th busiest cruise port¹ | 40th in total tonnage (U.S. Customs Port Michael Mierzwa Ranking) Board of Trustees Ranked #41 (2011) in tonnage which was a 52.1% increase from the previous year.¹ Benjamin F. Holland, Jr. Chairman 2011 Total Tonnage: 7,358,869 tons² Edward Walsh, III

Vice Chairman

Welcomed 863,000 Members passengers and crew 944 (2010)⁴ Gerald Sullivan (2012)ᶾ Mayor James Yarbrough Richard Devries John A. Smecca Ranked #3 in U.S. Vessel Calls (annual) Albert Shannon Cruise Industry including barge/tug calls Governing Body The Board of Trustees of

the Galveston Wharves

(Port of Galveston), a Annual Economic Impact: $3,060,700,000 BIL⁵ 3,326 Direct Jobs | 3,794 Induced Jobs body politic and corporate, is comprised Top Commodities: of seven trustees who are appointed by the Galveston City Council. Import Export One member of the Wind power equipment Bulk grains Board of Trustees is an ex-officio representative Agricultural equipment Containers of the City Council. The Machinery Machinery Board of Trustees of the Vehicles Vehicles Galveston Wharves fully Fertilizer products Linerboard and paper manages, controls, Lumber Products Carbon Black maintains and operates Military-related cargos Light fuels Port improvements and facilities owned by the city of Galveston. 1. U.S. Department of Transportation Website, www.dot.gov/maritime‐waterways 2. Texas Ports 2013‐2014 Capital Program report, page 19 3. Galveston Cruise Industry On A Successful Course, Houston Chronicle, Stanton, Robert, July 19, 4. Port of Galveston website – www.portofgalveston.com/civicalerts.aspx?AID=28 5. Martin Associate Economic Impact Report on Texas Ports Sponsored by Texas Port Association, 2011 6. Guide to the Economic Value of Texas Ports, Center for Transportation Research The University of Texas at Austin, Dec. 2008e 40 7. Presentation given at Panama Canal Stakeholder. Working Group Meeting. POHA, Bayport Container Terminal, Houston, Texas. August 27, 2012. [Slide number 21]

PORT PROFILE 123 Rosenberg Ave. Galveston, TX 77550 Port of Galveston • Galveston, Texas www.portofgalveston.com (409) 766-6105 The Port of Galveston is located at the mouth of Galveston Bay along the Upper Texas Coast in Galveston County. Associated by the public as port terminal for cruises, it has historically handled Port Director containerized cargo, dry and liquid bulk, break-bulk, roll-on/roll-off cargo, and refrigerated and Michael Mierzwa project cargo. Commodities arriving at the port are often destined for Galveston County, Harris County, Fort Bend County, Brazoria County, the state of Texas, as well as Texas’ neighboring states Board of Trustees and the United States Midwest region. The ports international trading partners include Mexico, Guatemala, Panama, Columbia, Venezuela, Brazil, Dominican Republic, Spain, Italy, Egypt, Israel, Benjamin F. Holland, Jr. Turkey, Bulgaria, Belgium, England, Germany, Saudi Arabia, United Arab Emirate, Kuwait, Chairman Edward Walsh, III Singapore and China.⁶ Vice Chairman

Members Gerald Sullivan Mayor James Yarbrough Richard Devries John A. Smecca Albert Shannon

Governing Body The Board of Trustees of the Galveston Wharves (Port of Galveston), a

body politic and

corporate, is comprised of seven trustees who are appointed by the Galveston City Council. One member of the Board of Trustees is an ex-officio representative of the City Council. The Board of Trustees of the Galveston Wharves fully manages, controls, maintains and operates

Port improvements and

facilities owned by the city of Galveston. 1. U.S. Department of Transportation Website, www.dot.gov/maritime‐waterways 2. Texas Ports 2013‐2014 Capital Program report, page 19 3. Galveston Cruise Industry On A Successful Course, Houston Chronicle, Stanton, Robert, July 19, 4. Port of Galveston website – www.portofgalveston.com/civicalerts.aspx?AID=28 5. Martin Associate Economic Impact Report on Texas Ports Sponsored by Texas Port Association, 2011 6. Guide to the Economic Value of Texas Ports, Center for Transportation Research The University of Texas at Austin, Dec. 2008e 40 7. Presentation given at Panama Canal Stakeholder. Working Group Meeting. POHA, Bayport Container Terminal, Houston, Texas. August 27, 2012. [Slide number 21]

Assets 123 Rosenberg Ave.  Significant Roll-on/Roll-off (RoRo) operation and its matured profile of RoRo operations. Galveston, TX 77550  Vigorous cruise line port terminal. www.portofgalveston.com  Proximity to the Port of Houston and Texas City (409) 766-6105

Connectivity Port Director  Situated 50 miles south of Houston and at the entrance of the Galveston-Texas City- Michael Mierzwa Houston Port Complex located in Galveston Bay.  Ground accessibility via IH 45, Gulf freeway Board of Trustees  Has two Class 1 rail companies, Union Pacific (UP) and Burlington Northern & Santa Fe (BNSF) with switch yards immediately adjacent to the Port’s West End Benjamin F. Holland, Jr. Chairman Potential Improvements to Infrastructure Edward Walsh, III Vice Chairman  Improvements needed to ensure adequate rail capacity in Class One manifest yards and

main lines to and from the ports to handle increases in exports and imports. ⁷ Members  Adequate maintenance dredging of channels to ensure consistent authorized depths, and Gerald Sullivan construction to provide additional deepening to maximum feasible depths to controlling Mayor James Yarbrough drafts at the expanded Panama Canal.⁵ Richard Devries  “First Mile” and “Last Mile” highway and roadway connectors to reduce congestion and John A. Smecca improve port productivity. ⁵ Albert Shannon  Pelican Island Project o Desalination plant Governing Body o A 3000-megawatt cogeneration facility that uses biomass to produce electricity at a The Board of Trustees of cost of 3.5 cents/kilowatt the Galveston Wharves (Port of Galveston), a o A four-lane vehicular bridge from Galveston to Pelican Island body politic and o A new railroad bridge and a railroad switching yard corporate, is comprised

of seven trustees who . are appointed by the Galveston City Council. One member of the Board of Trustees is an ex-officio representative of the City Council. The Board of Trustees of the Galveston Wharves fully manages, controls, maintains and operates Port improvements and facilities owned by the city of Galveston. 1. U.S. Department of Transportation Website, www.dot.gov/maritime‐waterways 2. Texas Ports 2013‐2014 Capital Program report, page 19 3. Galveston Cruise Industry On A Successful Course, Houston Chronicle, Stanton, Robert, July 19, 4. Port of Galveston website – www.portofgalveston.com/civicalerts.aspx?AID=28 5. Martin Associate Economic Impact Report on Texas Ports Sponsored by Texas Port Association, 2011 6. Guide to the Economic Value of Texas Ports, Center for Transportation Research The University of Texas at Austin, Dec. 2008e 40 7. Presentation given at Panama Canal Stakeholder. Working Group Meeting. POHA, Bayport Container Terminal, Houston, Texas. August 27, 2012. [Slide number 21]

PORT AT-A-GLANCE 200 W. Second St. Port Freeport • Freeport, TX Freeport, TX 77541 (972) 233-2667 Legal Name: Port Freeport Draft: Deep www.portfreeport.com

Executive Director st th US Port Ranking: 21 in foreign tonnage | 30 in total tonnage (U.S. Customs Port Glenn Carlson Ranking) Commissioners Tonnage (Millions) Bill Terry Domestic Chairman 4.7 23.3 Total (public and private) Ravi K. Singhania 0 10 20 30 Vice Chairman

John Hoss 2012 Total Container Cargo: 2,100,000 Twenty-foot Equivalent Units (T.E.U.s)¹ Secretary

Shane Pirtle, P.E. 3,000 155,000 50,000 Assistant Secretary

Thomas S. Perryman

Vessel Calls (annual) Truck Traffic (annual) Railcar Transits (annual) Paul Kresta including barge/tug calls public/private public/private Governing Body

Port Freeport encompasses

approximately 85 percent of Annual Economic Impact: $17.9 billion 13,362 Direct Jobs | 27,656 Induced Jobs Brazoria County, Texas. The Port Commission is Top Commodities: comprised of six members.

Imported Exported Five positions represent a specific geographic area, Aggregate and one position is at-large. Autos Chemicals Each Port Commissioner Chemicals Clothing serves a term of six years. Clothing Crude Foods Foods Paper goods LNG Resins Paper goods Rice Resins LNG Windmills

1. Texas Ports 2013-2014 Capital Program Report, http://ftp.dot.state.tx.us/pub/txdot-info/tpp/giww/port_capital_plan_2013- 14.pdf

PORT PROFILE 200 W. Second St. Port Freeport • Freeport, TX Freeport, TX 77541 (972) 233-2667 Brazoria County is one of Texas' most fertile agricultural areas, one of the nation's most www.portfreeport.com

successful commercial fishing ports, and one of the region’s more prolific fuel and mineral Executive Director areas. The primary economic bases of the county include chemical manufacturing, petroleum Glenn Carlson processing, offshore production maintenance services, diversified manufacturing, biochemical and electronic industries, commercial fishing and agriculture. In addition, the area's deep-water Commissioners channel and port facilities, sports fishing services and tourism are major components of the county's economic base. Bill Terry Chairman Assets Port Freeport land and operations currently include 186 acres of developed land and 7,723 Ravi K. Singhania acres of undeveloped land, 14 operating berths (public and private docks), a 45-foot deep Vice Chairman Freeport Harbor Channel and a 70-foot-deep berthing area. Future expansion includes building a 1,300-acre multi-modal facility, two multi-purpose 1,200-foot berths on 50 feet of water and John Hoss Secretary two dockside 120,000 square-foot transit sheds.

Shane Pirtle, P.E. Connectivity Assistant Secretary Port Freeport is conveniently accessible by rail, waterway and Thomas S. Perryman highway routes. There is direct access to the Gulf Intracoastal Paul Kresta Waterway, Brazos River Diversion Channel, State Governing Body Highways 36 & 288 and rail service provided by the Union Port Freeport encompasses Pacific Railroad. approximately 85 percent of Brazoria County, Texas.

The Port Commission is Union Pacific Railroad (UPRR) comprised of six members. and the Port are focused on Five positions represent a improving rail service and specific geographic area, capacity to and from the Port. and one position is at-large. 1. The replacement of the Each Port Commissioner swing bridge in downtown Freeport across the old Brazos River and improvements to serves a term of six years. the primary rail corridor between the Port and the Angleton switching yards were completed in 2011 by the UPRR. 2. New port multi-modal facilities could include up to three new rail lines each approximately 5,000 feet long, providing service enhancements related to both the Parcel 25 and the new Velasco Terminal. These investments will significantly improve capacity for Port clients, service by UPRR and is necessary to accommodate the increase in rail shipments.

1. Texas Ports 2013-2014 Capital Program Report, http://ftp.dot.state.tx.us/pub/txdot-info/tpp/giww/port_capital_plan_2013- 14.pdf

Current and Future Projects Channel improvements. 200 W. Second St. 1. Widening of the Channel is moving forward with construction to begin in early 2014, Freeport, TX 77541 and has been locally funded. (972) 233-2667 2. Deepening the Channel to 55 feet is advancing as well, with a key U.S. Army Corps of www.portfreeport.com Engineers report that was released in January 2013 signifying the completion of the ten Executive Director year feasibility study. The next steps will be the pre-engineering design and funding Glenn Carlson which is anticipated to be completed in three years.

Commissioners A new 22 acre truck queuing area is being planned. Plans call for an environmentally friendly off-road parking/staging area for trucks entering the Port and surrounding industrial facilities. It Bill Terry will be located south of State Highway 36 in close proximity to the Port entrances. It is Chairman anticipated that the Port will apply for Federal grant funds to offset a portion of the project cost. Ravi K. Singhania Vice Chairman

John Hoss Secretary

Shane Pirtle, P.E. Assistant Secretary

Thomas S. Perryman

Paul Kresta

Governing Body

Port Freeport encompasses approximately 85 percent of Brazoria County, Texas. The Port Commission is comprised of six members. Five positions represent a specific geographic area, and one position is at-large. Each Port Commissioner serves a term of six years.

1. Texas Ports 2013-2014 Capital Program Report, http://ftp.dot.state.tx.us/pub/txdot-info/tpp/giww/port_capital_plan_2013- 14.pdf

PORT AT-A-GLANCE Port of Palacios – Palacios, Texas

Legal Name: Matagorda County Navigation Dist. #1 Draft: Shallow 1602 Main Street 2009 Cargo Tonnage: 15.1 million (All commodity types in tons)¹ P O Box 551 Palacios, Tx 77465 Annual Economic Impact: $41.2 MIL² 541 Direct Jobs | 43 Induced Jobs Phone: (361) 972-5556

Top Commodity Chairman Ted R. Bates, Jr. Shrimping industry Vice Chairman Victor L. Eggemeyer

Secretary Jimmy E. Neeley

Commissioner Bryan L. Fields

Commissioner Greg T. Seaman

Port Director Debbie Morris

Governing Body The Port of Palacios is governed by 5 member panel of elected commissioners.

1. Texas Ports 2013-2014 Capital Program, Page 25 2. Texas Port Association website: www.texasports.org/ports/palacios 3. Guide to the Economic Value of Texas Ports, Center for Transportation Research The University of Texas at Austin, Dec. 2008, page 40 4. Texas Ports 2013 – 2014 Capital Program, pg. 24

Background

The Port of Palacios is located on the Upper Gulf Coast approximately 110 miles south of Houston in Matagorda County. Traditionally, Palacios’ chief industry has been shrimpingᶾ. Fishing, tourism and shipbuilding, including barges, tugs and commercial and recreational boats of various sizes and configurations are increasing. The Port 1602 Main Street also provides a safe harbor for commercial fishermen from the three counties around P O Box 551 Matagorda Bay – Matagorda, Jackson and Calhoun counties.⁴ Palacios, Tx 77465 Phone: (361) 972-5556 Assets • The Port has over 130 commercial fishing boats which operate from the four turning basins at the Port and are affiliated with the fish houses located at the Chairman Port Ted R. Bates, Jr. • Fish houses and commercial boats employ approximately 400 people. • Properties also included with the Matagorda County Navigation District #1 are Vice Chairman the Texas State Marine Education Center, Bay Side RV Park, Brooking-Hays Victor L. Eggemeyer

Yacht Harbor Subdivision Secretary • 4 turning basins with 13,000 linear feet of dock space Jimmy E. Neeley • 2 recreational marinas with 55 slips

• Currently own over 800 acres of developable land Commissioner

Bryan L. Fields Connectivity

• Currently there are no major direct shipments of import/export cargos from Commissioner Palacios and no Class 1 railroad connections Greg T. Seaman

Port Director Debbie Morris

Governing Body The Port of Palacios is . governed by 5 member panel of elected commissioners.

PORT AT-A-GLANCE 2323 FM 1593 South Calhoun Port Authority • Point Comfort, Texas Point Comfort, Texas www.calhounport.com Legal Name: Calhoun Port Authority Draft: Deep (361) 987-2813

Port Board 2009 Cargo Tonnage: ² 3,194,255 tons (All commodity types in tons) Randy L. Boyd. Annual Economic Impact: $ 2 BILᶾ 5,300 Direct Jobs | 4,590 Induced Jobs Board Chairman

Top Commodity H.C. “Tony” Wehmeyer, Jr. Board Secretary

Chemicals Shields A. “Tony” Holladay, Sr. Fertilizers Dell R. Weathersby Petroleum Products J.C. Melcher, Jr. Bauxite Aron Luna

Port Director Charles R. Hausmann, CPA

Governing Body The Port Authority is governed by a Port Board made up of six members elected from districts within Calhoun County. The Port Director and a full-time professional staff are responsible for port management and day-to-day operations. The Port Authority serves as the local non-federal sponsor of the Matagorda Ship Channel which extends 24 miles from the Point Comfort turning Basin to the Gulf of Mexico.¹

1. Calhoun Port Authority website: www.calhounport.com 2. Texas Ports 2011 – 2012 Capital Program, pg. A-21 3. Calhoun Port Authority website, http://www.calhounport.com/about/impact.php

Background The Port of Port Lavaca-Point Comfort, governed by the Calhoun Port Authority, serves 2323 FM 1593 South as a gateway to world markets for the Texas Mid-Coast Region. The port plays a vital Point Comfort, Texas role in supporting Texas chemical manufacturing industries and in building a stable www.calhounport.com economic foundation for Calhoun County. It is served by the Matagorda Ship Channel (361) 987-2813 and the Gulf Intracoastal Waterway. Primary cargos handled are chemicals, Port Board petrochemicals, aluminum ore and agricultural fertilizer. A key part of this mix is very

high value chemicals produced by area industries and sold for export to markets Randy L. Boyd. around the world.¹ Board Chairman

Assets H.C. “Tony” Wehmeyer, Jr. • Three liquid cargo facilities Board Secretary • Dry bulk dock that went into full operation in 2011. It can handle bulk carriers up to 740 ft. in length. The cargo handling system includes a spiral conveyor Shields A. “Tony” Holladay, Sr. unloading tower that travels on dock rails to access each cargo hold and feed a Dell R. Weathersby continuous conveyor system that extends to nearby industrial sites J.C. Melcher, Jr. Aron Luna Connectivity Port Director • Direct highway access to US Hwy 59, US Hwy 87, SH 35 and SH 172 Charles R. Hausmann, CPA • Served by the Point Comfort and Northern Railway, a short line railroad which connects to the Union Pacific main line at a point 20 miles north of the Port’s Governing Body main harbor The Port Authority is governed by a Port Board made up of six members elected from districts within Calhoun County. The Port Director and a full-time professional staff are responsible for port management and day-to-day operations. The Port Authority serves as the local

non-federal sponsor of the Matagorda Ship Channel which extends 24 miles from the Point Comfort turning Basin to the Gulf of Mexico.¹

1. Calhoun Port Authority website: www.calhounport.com 2. Texas Ports 2011 – 2012 Capital Program, pg. A-21 3. Calhoun Port Authority website, http://www.calhounport.com/about/impact.php

PORT AT-A-GLANCE Port of West Calhoun • Long Mott, Texas

Legal Name: West Side Calhoun County Navigation District 402 South Main Street Seadrift, Texas 77983 Draft: Shallow (361) 785-6492

Chairman Jack Campbell, Jr.

Secretary Teddy Hawes

Background The West Side Calhoun County Navigation District (the District) was formed on July 8, 1946 and was approved for $125,000 bond issue for the building of the barge Canal. The District operates the Port of West Calhoun, which is linked to the Gulf Intracoastal Waterway via the Victoria Barge Canal.

Port facilities include berths for commercial seafood productions and oil and gas exploration. The waterway is also used for barge shipments of industrial products including petroleum coke and chemicals.¹

1. Texas Port Association Website: www.texasports.org/ports/west-calhoun

PORT AT-A-GLANCE 1934 FM 1432 Port of Victoria • Victoria, Texas Victoria, Texas 77905 (361) 570-8855 www.portofvictoria.com

Legal Name: Victoria County Navigation District Draft: Shallow Executive Director Paul “Skip” Kaup

Commissioners Robby Burdge 228,205 bbls 5,711 ² Chairman crude Elton Calhoun Vice Chairman Vessel Calls (annual) Railcar Transits (annual) including barge/tug calls public/private Claud Jacobs Secretary

Kevin Krueger

Annual Economic Impact: $6.6 BIL (2011) - Of the $6.6 BIL, $1.5 BIL is direct business revenue Robert Loeb and the remaining $5 BIL is the value of the output to the State of Texas due to cargo moving via the Governing Body port. These numbers do not include the Eagle Ford The Victoria County Shale.¹ Navigation District (Port of Induced Jobs: 21,000 Victoria) is comprised of five members appointed by Victoria County Commissioners Court.

Commodities

Chemicals Petrochemicals, Frac Sand Crude Oil Liquid Fertilizers Dry Fertilizers Grain Aggregates

1. Port of Victoria, Texas Newsletter, June 2013, Volume 1, Issue 1, www.portofvictoria.come/Libraries/Documents 2. Port of Victoria Website: http://www.portofvictoria.com/Default/About.aspx

PORT AT-A-GLANCE 1934 FM 1432 Port of Victoria • Victoria, Texas Victoria, Texas 77905 (361) 570-8855 The Port of Victoria is located approximately 80 miles northeast of Corpus Christi and recent www.portofvictoria.com

expansions should significantly increase the tonnage operated by the port. The Port serves all Executive Director other ports along the Inland Waterway System within the United States. The main products Paul “Skip” Kaup traded at the port include chemicals, petrochemicals, sand, gravel, grain, project cargo, fertilizers and frac sand. Commissioners Robby Burdge Chairman

Elton Calhoun Vice Chairman

Claud Jacobs Secretary

Kevin Krueger

Robert Loeb

Governing Body The Victoria County Navigation District (Port of Victoria) is comprised of five members appointed by Victoria County Commissioners Court. Assets • New Industrial Park with multi-modal access • Center for the chemical, construction and steel fabrication and agribusiness industries offering access to all transportation modes. • New lighting system that allows for 24-hour operations • Foreign Trade Zone

Connectivity • The turning basin area is situated on over 2,000 acres • Rail spur with rail serviced provided by Union Pacific Railroad with track agreements with Union Pacific, Kansas City Southern and BNSF

Potential Improvements to Infrastructure • Container on barge service is being planned.

1. Port of Victoria, Texas Newsletter, June 2013, Volume 1, Issue 1, www.portofvictoria.come/Libraries/Documents 2. Port of Victoria Website: http://www.portofvictoria.com/Default/About.aspx

PORT AT-A-GLANCE 222 Power Street Port Corpus Christi • Corpus Christi, TX Corpus Christi, TX 78401 (361) 882-7110 http://portofcorpuschristi.com/ Legal Name: Port of Corpus Christi Authority Draft: Deep Executive Director US Port Ranking: 5th Largest in U.S. for tonnage John LaRue

Commissioner s Mike Carrell 2012 Cargo Tonnage: 78,806,189 Chairman 6,072 (All commodity types in tons)

Richard Borchard Vice Chairman

Cargo: Heavily focused on bulk, Al Jones Vessel Calls (annual) specifically petroleum Secretary including barge/tug calls Barbara Canales

Judy Hawley

Annual Economic Impact: $13.1 billion Direct Jobs 13,746 Robert Kostelnik Induced Jobs 16,767 Indirect Jobs 15,607

Charles Zahn

Top Commodities Tonnage Figures for 2012 All tonnages are given in short tons Governing Body The Port Commission is Commodity Tons comprised of seven members,

each serving a staggered term of Petroleum 65,367,343 three years. Three commissioners are appointed by Dry Bulk 7,939,684 the Corpus Christi City Council, three commissioners are Grain 2,578,847 appointed by the Nueces County Commissioners Court, and one is Chemical 1,966,012 appointed by the San Patricio County Commissioners Court. Liquid Bulk 554,336

Break Bulk 390,967

Revised 07/2013

222 Power Street PORT PROFILE Corpus Christi, TX 78401 (361) 882-7110 Port of Corpus Christi• Corpus Christi, TX http://portofcorpuschristi.com/

Executive Director The Port Corpus Christi has been generating business and jobs in South Texas for 86 years. John LaRue Strategically located on the western Gulf of Mexico, Port Corpus Christi is the fifth largest port in the United States in total tonnage. The Port provides a straight, 45’ deep channel and Commissioner s Mike Carrell quick access to the Gulf of Mexico and the entire United States inland waterway system. Chairman

The Port of Corpus Christi Authority district boundaries encompass all of Nueces and San Richard Borchard Patricio counties. Vice Chairman

Al Jones Secretary

Barbara Canales

Judy Hawley

Robert Kostelnik

Charles Zahn

Governing Body The Port Commission is comprised of seven members, each serving a staggered term of three years. Three commissioners are appointed by the Corpus Christi City Council, three commissioners are appointed by the Nueces County Commissioners Court, and one is appointed by the San Patricio County Commissioners Court.

Assets The Port offers more than 125 acres of open storage and fabrication sites, heavy lift capabilities, more than 295,000 sq. ft. of covered dockside storage as well as a cold storage facility. Port Corpus Christi operates Foreign Trade Zone #122, encompassing 25,000 acres with four active, general-purpose zones and 14 subzones.

Revised 07/2013

Connectivity The Port has on-site and direct connections to three Class-I railroads, BNSF, KCS and UP, 222 Power Street and direct, vessel-to-rail discharge capabilities through Corpus Christi Rail Terminal. The Joe Corpus Christi, TX 78401 Fulton International Trade Corridor provides direct access to Interstate 37 and Highway 181. (361) 882-7110 • Nueces River Railyard - June 2012 the U.S. DOT awarded a $10 million TIGER grant http://portofcorpuschristi.com/ for the port’s first phase of construction of the Nueces River Railyard (NRRY) 1. When complete the NRRY will include an 8,000 ft. unit train siding and a Executive Director four ladder track interchange yard totaling 15,400 track feet, enough space John LaRue

for over 335 rail cars Commissioner 2. Scope of work consists of construction of a 6 track rail interchange yard, s Mike Carrell service road, drainage infrastructure, wetlands mitigation site, bike trail, Chairman light relocation, fencing and railcar AEI readers 3. Contract awarded June 11, 2013 with a winning low bid of $12,658,040 Richard Borchard Vice Chairman Current and Future Projects • Completion of the La Quinta Trade Gateway Al Jones 1. Construction contract awarded in October 2012 for dredging of the channel Secretary extension and its expected finish date is July 2013 Barbara Canales • La Quinta Road/Bridge Project 1. Scope of work includes construction of a new two-lane access road Judy Hawley beginning at the Gulf Compress, cross the Green Lake drainage ditch, then generally run along the east side of the property near the recently Robert Kostelnik constructed dredge material placement area and terminate near the shoreline bluff Charles Zahn 2. Contract was award in April 24, 2013 in the winning low bid of $3,465,628.95 Governing Body Others Items of Interest The Port Commission is • New Port Commissioner, Barbara Canales, officially sworn in June 21, 2013 comprised of seven members, each serving a staggered term of three years. Three commissioners are appointed by the Corpus Christi City Council, three commissioners are appointed by the Nueces County Commissioners Court, and one is appointed by the San Patricio County Commissioners Court.

Revised 07/2013

PORT AT-A-GLANCE Port of Harlingen • Harlingen, TX Port of Harlingen Authority Legal Name: Port of Harlingen Authority Draft: Shallow (12’) P.O. Box 2646 Harlingen, TX 78551 U.S. Port Ranking by Tonnage n/a (956) 423-0283 www.portofharlingen.com

Barge Activity Port Director (acting) W.G. “Butch” Palmer, Jr 146.0 72.0 Inbound Outbound Alan Johnson 0 50 100 150 200 250 Chairman

Port Tonnage 900,000 tons (est.) Barge Traffic 218 Alejandro Hinojosa, Sr Container Traffic1 n/a Secretary

Bryan Duffy Transit Activity2 Commissioner

218 939 161 Governing Body The Port of Harlingen

Authority is a navigation district and political subdivision of the state of Vessel Calls (annual) Truck Traffic (annual) Railcar Transits (annual) Texas. The Authority is including barge/tug calls public/private3 public/private4 governed by a Port Commission composed of Economic Impact (2006)5 three elected commissioners. Economic Value ($ Millions): $19.3 State and Local Taxes ($ Millions) Total Jobs: 88 | Direct Jobs: 40 Total Taxes: $0.4 Principal Trading Partners Mexico Top Commodities6

Imported Exported Service Area Liquid Fertilizer Gasoline Raw Sugar Corn South Texas and northern Mexico Sand Diesel Cotton Aggregates Ethanol Sorghum

1 U.S. Army Corps of Engineers, Waterborne Commerce of the United States, Part 5, National Summaries, (CY2011) 2 Mirna Del Castillo, Port of Harlingen activity during FY 2012 (personal communication via e‐mail, September 9, 2013) 3 Cement (686) and liquid fertilizer (253) represent the commodities transported most from barge to trucks at the Port of Harlingen (FY2012). 4 Liquid fertilizer is the commodity transported most from barge to rail at the Port of Harlingen (FY2012). 5 0‐5538‐P1, Guide to the Economic Value of Texas Ports, Center for Transportation Research, 2008 6 Texas Ports Association, Port of Brownsville (profile), Accessed: September 6, 2013 Revised 09/2013

PORT PROFILE Port of Harlingen • Harlingen, TX

The Port of Harlingen is a shallow draft barge port located in the geographic center of the lower Rio Grande Valley four miles east of the city of Harlingen, Texas. The Port exports 100 percent of the sugar produced in the Rio Grande Valley. And, the Port imports critical Valley resources, such as 90 percent of fertilizer used by South Texas farmers and 70 percent of the refined petroleum products for the South Texas region.7

The Port is connected to the Gulf Intracoastal Waterway by means of the Harlingen Channel. The Harlingen Channel extends from the Gulf Intracoastal Waterway 25 miles west of Mile 646 and is supplied by the Arroyo Colorado, a fresh water source.8

Assets  650' (195m) general dry/liquid cargo wharf  100' (30m) dry bulk wharf

 Five smaller docks (50' X 25' or 7.5m X Source: TxDOT 15m) located near the turning basin and extend into the Harlingen channel  Over 150 acres of open storage

Connectivity  Nearby several inland ports of entry into Mexico within Brownsville/Los Indios area  Barge lines serve the Port via the Gulf Intracoastal Waterway (GIWW)  Intermodal railroad services offered by Union Pacific (UP)  Harlingen Channel, the waterway of the Port, is maintained to 120 feet wide by 12 feet deep  Air freight service available at the Valley International Airport (Harlingen, Texas)

Current and Future Projects9 Project Description Estimated Cost (FY 13) Estimated Cost (FY 14) East Dock Refurbishment $1,000,000 $0 Security Enhancements (Federally Funded) $130,000 $0 TOTAL $1,130,000 $0

7 Port of Harlingen website http://portofharlingen.com as of September 10, 2013 8 Port of Harlingen – Tariff #006 as of September 3, 2013, http://portofharlingen.com/wp‐content/uploads/2012/10/Port‐of‐Harlingen.pdf 9 Texas Ports 2013 – 2014 Capital Program, Texas Department of Transportation, page A‐5 Revised 09/2013

PORT AT-A-GLANCE

Port of Port Isabel • Port Isabel, TX Port of Port Isabel Legal Name: Port of Isabel/San Benito Navigation District Draft: Deep (36’) 250 Industrial Drive Port Isabel, TX 78578 U.S. Port Ranking by Tonnage n/a (956) 943-7826 www.portofportisabel.com

Vessel Activity1 Port Director Deep Water Steve Bearden

13 60 25 Shallow GIWW Board of Commissioners Shallow Other Victor Barrera 0 20 40 60 80 100 120 Chairman

Port Tonnage 50,000 tons (est) Barge Traffic 85 M.R. Garcia II Container Traffic n/a Secretary

Transit Activity1 Robert Ostos Asst. Secretary

100 500 n/a Governing Body The Port of Isabel/San Benito Navigation District is governed by a Board of Commissioners consisting Vessel Calls (annual) Truck Traffic (annual) Railcar Transits (annual) of three elected officials. including barge/tug calls public/private public/private These commissioners

serve four-year terms on a Economic Impact (2006)2 staggered basis.

Economic Value ($ Millions): $85.6 State and Local Taxes ($ Millions) Service Area Total Jobs: 948 | Direct Jobs: 605 Total Taxes: $2.7 Mexico, Central and South America and United States Top Commodities1

Imported Exported Concrete n/a Sand Aggregate

1 Steve Beardon, Port Director at Port Isabel/San Benito Navigation District estimates 2012 Port activity (personal communication via e‐mail, September 11, 2013) 2 0‐5538‐P1, Guide to the Economic Value of Texas Ports, Center for Transportation Research, 2008.(CY2006) Revised 09/2013

PORT PROFILE Port of Port Isabel • Port Isabel, TX

The Port of Isabel is a deep water port that serves oil service vessels, various seafood processers, concrete manufacturers, and boat construction and repair companies. The Port is adjacent to the City of Port Isabel and the Town of South Padre Island. Waters interfacing with the Port include the Brownsville Ship Channel, Gulf Intracoastal Waterway (GIWW), Gulf of Mexico and Port Isabel Channel.3 About 200 people worked the manufacturing sector in 2006, which is responsible for over 50 percent of the revenues from businesses dependent on the Port. The shrimping sector employed roughly 300 during the same period.4

In 2007, the Port Isabel-San Benito Navigation

District (PISBND), Canal and Navigation Commissioners changed the strategic direction from servicing cargo and cruise ships to attracting offshore oil and gas industries. As a result, SubSea Source: TxDOT 7 (headquartered in London, England UK) built onsite a $40 million pipeline fabrication spool-base.1

Assets  726 acres of waterfront land  Storage: 45 acres open  5 docks (2 cargo, 1 roll-on/roll-off, 2 oil)  1,150 feet of deepwater docks  2,100 feet of deepwater frontage available

Connectivity  Nearby several inland ports of entry into Mexico within Brownsville/Los Indios area  Barge lines serve the Port via the Gulf Intracoastal Waterway (GIWW)  Controlling depth is 150 feet wide by 36 feet deep with a Turning Basin of a 1,000 feet wide by 36 feet deep  No railroad services offered  Air freight service at the Brownsville/South Padre Island International Airport

Current and Future Projects Project Description Estimated Cost (FY 12) Estimated Cost (TBD) Repair High Dock $750,000 $0 Cruise Dock Rehabilitation (oil dock conversion) $600,000 $0 Dock Rehabilitation (two additional oil docks) $0 $1,200,000 TOTAL $1,350,000 $1,200,000

3 Port Isabel/San Benito Navigation District, www.portofportisabel.com website as of September 11, 2013 4 An Analysis of the Value of Texas Seaports in an Environment of Increasing Global Trade, Center for Transportation Research, 2008. Revised 09/2013

PORT AT-A-GLANCE

Port of Brownsville • Brownsville, TX Port of Brownsville Legal Name: Brownsville Navigation District Draft: Deep (42’) 1000 Foust Road Brownsville, TX 78521 U.S. Port Ranking by Tonnage1 #67 (U.S. Customs Port Ranking) (956) 831-4592 www.portofbrownsville.com

Tonnage (millions) Port Director and CEO Domestic Eduardo A. Campirano

2.5 2.9 0.5 Foreign Inbound Board of Commissioners Foreign Outbound Sergio Tito Lopez 0 2 4 6 8 Chairman

2012 Port Tonnage 5,536,689 tons Barge Traffic 707 Carlos R. Masso 2 Container Traffic n/a Vice-Chairman

Transit Activity3 Martin C. Arambula Secretary

1,100 41,000 27,194 John Reed Asst. Secretary

Ralph Cowen Asst. Secretary Vessel Calls (annual) Truck Traffic (annual) Railcar Transits (annual) including barge/tug calls public/private public/private Governing Body The Brownsville Navigation Economic Impact4 District is governed by a Board of Commissioners Economic Value ($ Millions): $2,024.9 State and Local Taxes ($ Millions) consisting of five elected Total Jobs: 21,590 | Direct Jobs: 4,373 Total Taxes: $134.1 | Direct Taxes: $13.4 officials. These commissioners serve four- year terms on a staggered Top Commodities5

basis. Imported Exported Principal Trading Steel slab Steel beams (billets) Steel products Iron ore Partners Hot and cold roll Iron ore Petro products Mexico, Central/South Steel plate Petro products Lubricants America, China, Korea, Lubricants Japan, Germany, Belgium, Russian and Brazil

Service Area

Mexico, Central and South America and United States 1 U.S. Army Corps of Engineers, Waterborne Commerce of the United States, Part 5, National Summaries, (CY2011) 2 U.S. Army Corps of Engineers, U.S. Waterborne Container Traffic by Port/Waterway in 2011, (CY2011) 3 Comprehensive Annual Financial Report (CAFR), Finance Dept. Brownsville Navigation District, (CY2012) 4 The Local and Regional Economic Impacts of the Port of Brownsville. Martin Associates, 2012. (CY2011) 5 Texas Ports Association, Port of Brownsville (profile) as of September 6, 2013 Revised 09/2013

PORT PROFILE Port of Brownsville • Brownsville, TX

The Port of Brownsville is located at the southernmost tip of Texas at the end of a 17-mile channel that meets the Gulf of Mexico at the Brazos Santiago Pass. The Port sustains a vital ship recycling industry that works on 80 percent of the ships recycled in the U.S.6 During 2012, Keppel AmFELS employed 2,400 to repair mobile drilling rigs and platforms. More than 50 percent of the direct revenue is generated by the oil rig and ship repair operations. In terms of total revenue, scrap generates the greatest revenue impact followed by petroleum products. Barge and bunkering operations generate the second largest local revenue impact, followed by trucking operations.

Assets • Approximately 40,000 acres of land • Storage: 13 acres covered, 65 acres open • 18 docks (12 cargo, 4 oil, 1 liquid, 1 bulk) • Foreign-Trade Zone (FTZ) #627 Source: TxDOT

Connectivity • Nearby several inland ports of entry into Mexico within Brownsville/Los Indios area • Barge lines serve the Port via the Gulf Intracoastal Waterway (GIWW) • Entrance Channel is 250 feet wide by 42 feet deep with a Turning Basin of 1,200 feet wide by 36 feet deep • Intermodal railroad services offered by Brownsville & Rio Grande Int’l Railroad (BRG) • Air freight service at the Brownsville/South Padre Island International Airport

Current and Future Projects8

Project Description Estimated Cost (FY 13) Estimated Cost (FY 14) Deepening and Widening Feasibility Study $650,000 $500,000 Lift Station Improvements $60,000 $0 Water Tank Rehabilitation $1,033,000 $982,000 New Infrastructure (FY13, Dock No. 16)9 $20,500,000 $0 Improvements to Docks, Warehouses and Cargo Laydown $3,502,000 $26,038,000 Areas (FY14, Oil Dock No. 6) Port Security Improvements $3,986,000 $0 Rail Improvements $2,200,000 $0 TOTAL $31,931,000 $27,520,000

6 News Release #: MARAD 03‐13, Maritime Administrator Matsuda Tours Port of Brownsville, Dated: March 4, 2013 7 Foreign‐Trade Zone #62 operations during CY 2012 ranked nationally at #11 and #1 in Merchandise Received and Exports activity, respectively, according to the 74th Annual Report of the Foreign‐Trade Zones Board to the Congress of the United States, Appendix C, August 2013 8 Texas Ports 2013 – 2014 Capital Program, Texas Department of Transportation, page A‐5 9 Dock No. 16 construction partially funded by a $12 million federal TIGER (MARAD) grant in FY 2012 to expand Port container operations. Revised 09/2013

APPENDIX D GLOSSARY OF MARITIME TERMS

100

Air Draft Distance from surface of the water at mean high tide to the highest point of a vessel. Air draft can also reference the clearance of an overhead obstruction.

Barge A large, flat-bottomed boat used to carry cargo from a port to shallow-draft waterways. Barges have no locomotion and are pushed by towboats. A single, standard barge can hold 1,500 tons of cargo or as much as either 15 railroad cars or 60 trucks can carry. A barge is 200 feet long, 35 feet wide and has a draft of 9 feet. Barges carry dry bulk (grain, coal, lumber, gravel, etc.) and liquid bulk (petroleum, vegetable oils, molasses, etc.).

Berth (v.) To bring a ship to a berth. (n.) The wharf space at which a ship docks. A wharf may have two or three berths, depending on the length of incoming ships.

Breakbulk cargo Non-containerized general cargo stored in boxes, bales, pallets or other units to be loaded onto or discharged from ships or other forms of transportation. (See also: bulk and container.) Examples include iron, steel, machinery, linerboard and wood pulp,

Bulk cargo Loose cargo (dry or liquid) that is loaded (shovelled, scooped, forked, mechanically conveyed or pumped) in volume directly into a ship’s hold; e.g., grain, coal and oil.

Buoys Floats that warn of hazards such as rocks or shallow ground, to help ships maneuver through unfamiliar harbors.

Channel Draft The average, low-tide depth of a ship or barge channel.

Container A box made of aluminum, steel or fiberglass used to transport cargo by ship, rail, truck or barge. Common dimensions are 20' x 8’ x 8' (called a TEU or twenty-foot equivalent unit) or 40' x 8' x 8', called an FEU. Variations are collapsible containers, tank containers (for liquids) and "rag tops" (open-topped containers covered by a tarpaulin for cargo that sticks above the top of a closed box). In the container industry, containers are usually simply called boxes.

101

Container chassis A piece of equipment specifically designed for the movement of containers by highway to and from container terminals.

Container crane Usually, a rail-mounted gantry crane located on a wharf for the purpose of loading and unloading containers on vessels.

Container terminal A specialized facility where ocean container vessels dock to discharge and load containers, equipped with cranes with a safe lifting capacity of 35-40 tons, with booms having an outreach of up to 120 feet in order to reach the outside cells of vessels. Most such cranes operate on rail tracks and have articulating rail trucks on each of their four legs, enabling them to traverse along the terminal and work various bays on the vessel and for more than one crane to work a single vessel simultaneously. Most terminals have direct rail access and container storage areas, and are served by highway carriers.

Deep water Deep water channels are defined as having depth of 35 feet or greater.

Dock (verb) - To bring in a vessel to tie up at a wharf berth. (One parks a car, but docks a ship.) (noun) - A dock is a structure built along, or at an angle from, a navigable waterway so that vessels may lie alongside to receive or discharge cargo. Sometimes, the whole wharf is informally called a dock.

Draft The depth of a loaded vessel in the water taken from the level of the waterline to the lowest point of the hull of the vessel; depth of water, or distance between the bottom of the ship and waterline.

Drayage Transport by truck for short distances; e.g. from wharf to warehouse.

Dredge (noun) A waterborne machine that removes unwanted silt accumulations from the bottom of a waterway. (verb) The process of removing sediment from harbor or river bottoms for safety purposes and to allow for deeper vessels.

102

Dry bulk Minerals or grains stored in loose piles moving without mark or count. Examples are potash, industrial sands, wheat, cotton, sugar, soybeans, and peanuts.

Elevator A complex including storage facilities, computerized loading; inspection rooms and docks to load and unload dry bulk cargo such as grain or green coffee.

Fleeting The area at which barges, towboats and tugs are berthed until needed. The operation of building or dismantling barge tows.

Foreign Trade Zone (FTZ) Known in some countries as a free zone, a foreign trade zone (FTZ) is a site within the USA (in or near a U.S. Customs port of entry) where foreign and domestic goods are held until they ready to be released into international commerce. If the final product is imported into the U.S., duties and taxes are not due until the goods are release into the U.S. market. Merchandise may enter a FTZ without a formal Customs entry or the payment of Customs duties or government excise taxes. In the zone, goods may be: stored; tested; sampled; repackaged or re-labeled; cleaned; combined with other products; repaired or assembled, etc.

Gantry crane Track-mounted, shoreside crane utilized in the loading and unloading of breakbulk cargo, containers and heavy lift cargo.

General cargo Consists of both containerized and breakbulk goods, in contrast to bulk cargo. See: breakbulk, container, bulk, dry bulk). General cargo operations produce more jobs than bulk handling.

Gulf Intracoastal Waterway (GIWW) The GIWW is a 1,300-mile waterway along the U.S. Gulf of Mexico that stretches from St. Marks, Florida to Brownsville, Texas. The Texas segment of the GIWW is 423 miles in length and begins at the Sabine River and ends at Port Isabel, linking the state’s deep and shallow draft ports, as well as its private terminals. The GIWW is authorized by Congress to be maintained at a width of 125 feet and a depth of 12 feet.

103

Heavy lift Very heavy cargoes that require specialized equipment to move the products to and from ship/truck/rail/barge and terminals. This "heavy lift" machinery may be installed aboard a ship designed just for such transport. Shore cranes, floating cranes and lift trucks may also adapted for such heavy lifts.

Home port Port from which a cruise ship loads passengers and begins its itinerary, and to which it returns to disembark passengers upon conclusion of voyage. Sometimes referred to as "embarkation port" or "turn around port."

Hostler (or hustler) A tractor, usually unlicensed, for moving containers within a yard. An employee who drives a tractor for the purpose of moving cargo within a container yard.

Intermodal The movement of cargo on two or more transportation modes. The term “intermodal” can also refer to moving goods in a standardized metal container that is easily transferred between ships, rail, and trucks.

Long ton A long ton equals 2,240 pounds.

Marshalling yard This is a container parking lot, or any open area where containers are stored in a precise order according to the ship loading plan. Containers terminals may use a grounded or wheeled layout. If the cargo box is placed directly on the ground, it is called a grounded operation. If the box is on a chassis/trailer, it is a wheeled operation.

Mean low water (MLW) Lowest average level water reaches on an outgoing tide.

Mean high water (MHW) Highest average level water reaches on an outgoing tide.

Mooring dolphin A cluster of pilings to which a boat or barge ties up.

Niche A narrow specialization. In the context of ports, a niche port is one that serves a specialized type of cargo or client, such as the offshore oil field services industry.

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Ocean carrier Diesel-fueled vessels have replaced the old steamships of the past, although many people still refer to modern diesel ships as steamships. Likewise, the person who represents the ship in port is still often called a steamship agent.

On-dock rail Direct shipside rail service. Includes the ability to load and unload containers/breakbulk directly from rail car to vessel.

On-terminal rail Rail service and trackage provided by a railroad within a designated terminal area.

Public-Private Partnership (P3) A contractual agreement between a public agency and a private sector entity to deliver and/or finance transportation projects.

Port Authorities Advisory Committee (PAAC) A seven-member committee appointed by the Texas Transportation Commission to provide a forum for exchanging information between Texas ports and the Commission. The PAAC provides the Commission with port-specific information and perspective that assists with the development of department policy. The PAAC’s membership includes one representative from the Port of Houston, three representatives from the upper Texas Coast ports, and three representatives from the lower Texas Coast ports. The PAAC was established under Section 55.006 of the Texas Transportation Code.

Pilot A licensed navigational guide with thorough knowledge of a particular section of a waterway whose occupation is to steep ships along a coast or into and out of a harbor. Local pilots board the ship to advise the captain and navigator of local navigation conditions (difficult currents; hidden wrecks, etc.).

Port of call Port at which cruise ship makes a stop along its itinerary. Calls may range from five to 24 hours. Sometimes referred to as "transit port" and "destination port." (See also: home port)

Project cargo The materials and equipment to assemble a special project overseas, such as a factory or highway.

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Rail yard A rail terminal at which occur traditional railroad activities for sorting and redistribution of railcars and cargo.

RO/RO or ro/ro Short for roll on/roll/off. A ro/ro ship is designed with ramps that can be lowered to the dock so cars, buses, trucks or other vehicles can drive into the belly of the ship, rather than be lifted aboard. A ro/ro ship, like a container ship, has a quick turnaround time of about 12 hours.

Rubber-Tired Gantry (RTG) A traveling crane used for the movement and positioning of containers in a container field. RTG's may also be used for loading and unloading containers from rail cars.

Shallow Draft Shallow draft channels are defined as being less than 25 feet deep.

Shoaling The gradual build-up of sand and other sediment in ship channels due to ocean currents and waves.

Short ton A short ton equals 2,000 pounds. Lifting capacity and cargo measurements are designated in short tons.

Spreader A device for lifting containers by their corner posts. The spreader bar on a container crane is telescopic to allow it to lift containers of various lengths.

TEU Abbreviation for “Twenty-foot Equivalent Unit.”

Texas Ports Association (TPA) A trade organization that promotes the collective interest of Texas ports and their ability to compete with ports outside of Texas.

Transit shed The shed on a wharf is designed to protect cargoes from weather damage and is used only for short-term storage. Warehouses operated by private firms that house goods for longer periods.

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Transhipment The unloading of cargo at a port or other location where it is then reloaded, sometimes into another mode of transportation, for transfer to its final destination.

Tugboat Strong v-hull shaped boat used for maneuvering ships into and out of port and to carry supplies. Large ships are too powerful to pull up to the wharf on their own power. The ship cuts its power and lets the tug nudge it in. Generally barges are pushed by towboats, not tugs.

Twenty Foot Equivalent Unit (TEU) A unit of measurement equal to the space occupied by a standard twenty foot container. Used when stating the capacity of container vessel or storage area. One 40 ft. Container is equal to two TEU's.

Unit Train A train of a specified number of railcars, perhaps 100, which remain as a unit for a designated destination or until a change in routing is made.

U.S. Army Corp of Engineers (USACE) The federal agency responsible for permitting and maintaining federally-funded channels. The USACE also is responsible for building, maintaining, and operating locks along the GIWW.

Vessel operator A firm that charters vessels for its service requirements, which are handled by their own offices or appointed agents at ports of call. Vessel operators also handle the operation of vessels on behalf of owners.

Weights and Measures/Measurement ton: 40 cubic ft or one cubic meter Net ton/short ton – 2,000 lbs Gross ton/long ton – 2,240 lbs Metric ton/kilo ton – 2,204.6 lbs Cubic meter – 35.314 cubic ft.

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