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Meeting Summary Prepared by the Texas A&M Transportation Institute

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Meeting Summary Prepared by the Texas A&M Transportation Institute TxDOT Panama Canal Stakeholder Working Group Port of Houston – Bayport Container Terminal August 27, 2012 Draft Meeting Summary Prepared by the Texas A&M Transportation Institute 1. Panama Canal Stakeholder Working Group Members and Alternates Present: Honorable Ed Emmett, Harris County Judge Honorable Carlos H. Cascos, Cameron County Judge, Vice Chair Mr. Jack Todd, Texas Association of Manufacturers Mr. John LaRue, Texas Port Association Colonel Leonard Waterworth, Port of Houston Authority Mr. Rick Wilson for Mr. Fred Malesa, BNSF Mr. Eddie Miranda for Mr. Carlton Schwab, Texas Economic Development Corporation Mr. Jim Greenwood, Texas Oil and Gas Association Mr. Kenneth Dierschke, Texas Farm Bureau Mr. Rigoberto Villarreal, City of McAllen Mr. Steve Boecking, Alliance Texas Mr. Joseph Adams, Union Pacific Mr. Jim Griffin, East Harris County Manufacturers Association Mr. Amir Mirabi for Mr. Aaron Demerson, Office of the Governor, Economic Development & Tourism Other individuals attending the meeting are listed in Appendix A 2. Welcome, Introductions, and Review of Agenda – PCSWG Chair, Judge Ed Emmett PCSWG Chair Judge Ed Emmett opened the meeting by thanking Colonel Waterworth and other members of Port of Houston Authority for hosting the Sunday boat tour of the Houston Ship Chanel and dinner as well as the meeting today. He welcomed PCSWG members, invited speakers, and other attendees to the meeting. Judge Emmett introduced Kippy Caraway, Intergovernmental Relations Director for the City of Houston. 3. Open Public Comment Period - PCSWG Chair Judge Ed Emmett Matt Tajata, Air Alliance Houston Matt Tajata complemented TxDOT for establishing the working group to examine transportation issues in the state associated with the Panama Canal expansion. He noted the importance of considering environmental issues and the quality of life for local residents in port expansion plans and transportation projects. Matt voiced concerns over possible air quality impacts around ports. Panama Canal Stakeholder Working Group – August 27, 2012 Meeting Summary 1 Al Navarro Al Navarro noted he was attending the meeting as a private citizen. He expressed interest in the scope of the working group and commended TxDOT for forming the group. Representative Armando Walle, 140th District in north Houston Representative Walle noted that many residents in the 140th District work for port-related businesses. He thanked Jud Emmett for his leadership in chairing the PCSWG and TxDOT in establishing the group. Representative Walle noted the importance of the Houston port to the economy of the area and the state. 4. Invited Speakers Bruce Carlton, National Industrial Transportation League Bruce Carlton provided an overview of possible implications of the Panama Canal expansion from a national perspective and how the expansion may influence ports in Texas. He commended TxDOT on establishing the PCSWG and thanked Judge Emmett for his leadership with the group. Bruce covered the following topics in his presentation. The working group is taking the right approach in listening to shippers, carriers, ports, and industry groups on the potential impacts of the Panama Canal expansion. Transportation improvements can then be formulated to address identified needs. Given limited resources, it is important to invest wisely in projects that will provide the greatest benefits. There is still a lot of uncertainty about the impacts of the Panama Canal expansion. Predicting the future is always difficult, and there are a lot of unknowns related to fees to use the expanded canal, the global economy, and the movement of jobs and trade flows. In the 1950s, most of the U.S. trade with Asia focused on Japan. China has been the dominant trading partner recently, but it appears there is a shift to Vietnam for some products. Brazil appears to be poised to take off economically, and other countries in Latin America are doing well. Mexico also appears to be recovering. As a result, north-south trade may become more important. There is a need to have a 360 degree view of trade opportunities. Focusing on exports, which this group is doing, is a good approach. Too much emphasis may be being placed on imports, especially possible shifts of container traffic to Gulf and East Coast ports. Exports expand the country’s industrial base. It is important to communicate with port stakeholders, including importers/exporters, third party logistic firms, shippers, carriers, and other groups. All these groups have their own plans and ideas. While not all groups will provide information on their plans, seeking input – as the PCSWG is doing – is important. Considering what shippers want is important. In general, shippers want speed, reliability, efficiency, and flexibility. Reliability is often more important than speed. The ability to respond to dynamic changes in the market is also important. Panama Canal Stakeholder Working Group – August 27, 2012 Meeting Summary 2 Ports do not all provide the same services. Ports also have different issues and needs. Ongoing dredging is more important at some ports than others, although all ports need ongoing maintenance, as well as periodic capital improvements. There is a lot of competition among ports in the U.S. – Texas needs to be strategic in making investments and focusing on the strengths of different ports. The Panama Canal expansion is being undertaken to support Panama’s future economic development, not the U.S. The Panama Canal expansion will provide more options and more flexibility for shippers. Changes in shipping patterns may not happen immediately, but changes are likely to occur over time. The first and last mile is important in shipping. Examining roadway and rail links is important to ensure bottlenecks to freight flows do not exist. Addressing bottlenecks that do exist is important. China and other countries spend more on infrastructure than the U.S. does. Ports do not stand still, and shipper and carriers will respond to changing conditions. It is a competitive environment and cargo diversions will occur to follow the marketplace. There is no single answer – maintaining flexibility to respond to different conditions will be important. PCSWG members asked a number of questions and discussed a number of topics. Maintaining flexibility and a regional perspective was discussed, as was federal funding, typical contracts with shippers, and the markets for different exports. Continuing to build on and expand existing partnerships with public and private sector groups was also discussed, along with working with the Texas Congressional delegation for port funding. Colonel Christopher W. Sallese, Commander, Galveston District Colonel Sallese summarized the value Texas ports bring to the state and the country. He described the major imports and exports at Texas ports, federal navigation funding, and the health of the navigation system. Colonel Sallese presented key statistics on Texas ports, the GIWW, and inland waterways. He discussed the recent U.S. Port and Inland Waterways Modernization Report. Colonel Sallese covered the following points in his presentation. Texas ranks first among states in the Nation for maritime commerce. There are 13 shallow draft ports and 15 deep draft ports in the state. The GIWW links the entire system. Texas ports accounts for over $300 billion in economic value to the state. The ports provide over 1 million direct jobs. Four Texas ports rank among the top 10 ports in the country. Approximately $20 billion in private investment is underway at ports throughout the state. The Texas coast is home to the major concentration of refinery capacity and petrochemical companies in the country. Maintaining and improving Texas navigation channels is important to the country. Texas ports export 22 percent of the nation’s total maritime export tonnage. Approximately 43 percent of maritime imported crude oil comes through Texas ports. Texas ports create over 1 million direct jobs regionally and approximately 1.3 million indirect jobs nationally. The ports generate $4.5 billion in local and state tax revenue annually. The GIWW provides an intermodal linkage to domestic Panama Canal Stakeholder Working Group – August 27, 2012 Meeting Summary 3 and international markets and facilities. One foot of draft restriction results in lost benefits due to lightering and lightening loads, however. Texas ports receive less than $.25 on the dollar of the Harbor Maintenance Trust Fund (HMTF) contributions for operations and maintenance. Currently, two channels are authorized at a depth of 50 feet or greater, with two more pending. The current channel depths do not optimize transportation or supply chain efficiencies. Federal navigation funding has declined in recent years. It is important to understand the current funding challenges and to make long-term plans for operations and maintenance and justified investments that are critical to the future. It is important to maintain the resiliency of the system. Adequate funding is needed to support dredging to project depth and advanced maintenance, constructing incremental levee capacity, operational and maintenance improvements to locks and gated facilities on the GIWW, and jetty repairs. Other needed improvements are preparing placement areas for dredge materials, conducting operations and maintenance discretionary studies and implementing Department of the Army Mobilization Processing activities. Ensuring environmental sustainability and navigation safety are also important. Other funding
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