TxDOT Maritime Division : Essential to the Economy TXDOT AND THE MARITIME TRANSPORTATION SYSTEM

FAST FACTS 1.8 MILLION jobs supported by the industry ( 12.5% since 2015)1 TEXAS PORTS: 597.5 MILLION total tons of cargo moved ESSENTIAL TO makes Texas 1st in U.S. maritime commerce THE ECONOMY ( from 2nd place in 2018)2 Generating over $242 billion in annual overall trade, Texas ports play an essential role in driving $102 BILLION the Texas economy.3 In 2019, Texas became the personal income and local number one state in maritime commerce by tonnage, consumption supported overtaking Louisiana. Three of the top five ports in by the port industry the U.S. based upon tonnage were in Texas with Port ( 11% since 2015)1 becoming the tonnage leader among U.S. ports for the first time.2 Even during the coronavirus pandemic, Texas ports stayed in business— $7.8 BILLION protecting jobs, bolstering the economy, and keeping state/local tax shelves stocked with food and medical supplies for revenue generated by consumers. Despite the effects of the pandemic and port industry in part due to the strong export market for oil and gas, ( 13% since 2015)1 Texas ports continue to thrive. Page 1 Texas Ports: Essential to the Economy TxDOT Maritime Division TxDOT Maritime Division Texas Ports: Essential to the Economy Ports Port of Port of Orange Deep Draft Channel Beaumont TEXAS MARITIME Shallow Draft Channel Cedar Bayou Navigation District Port of SYSTEM AND NEEDS Shallow Draft Recreational Channel Anahuac Highways Port Houston Port of The Texas maritime system includes 11 deep draft ports, eight shallow draft Port Arthur ports, two recreational shallow draft ports, and the 379-mile-long Texas arm of the Gulf (GIWW). Ports are a vital part of the national freight 0 30 60 network, helping farmers move their product to markets overseas, bringing raw Sabine Neches ! Miles Navigation District materials to Texas manufacturers and clothes, electronics, and other consumer ° goods to all Texans. All of the Texas ports are interconnected by the GIWW, a shallow draft channel that links intrastate barge traffic with ocean-going vessels and handles both domestic and foreign trade. Port of Port Freeport Texas ports are critical to the economic growth of Texas and affect all Texans. Galveston The total economic value of the port and maritime cargo activity provided by the Port of GIWW Texas ports and GIWW was estimated at just under $450 billion in 2018.1 To better Bay City $56.8 million support Texas businesses, the maritime industry must continually improve port Calhoun average estimated annual Port Authority facilities, waterways, inland connectivity to the ports, and the GIWW via maritime maintenance costs improvement projects. Port project needs are outlined in the 2022-2023 Texas Port Mission Plan. Port of Deep Draft Ports Palacios MARITIME PROJECT TYPES $323 million PROJECT TYPE DESCRIPTION Port of average project West Calhoun Port facility improvements inside the gates include berth backlog per port Port Facilities expansions, terminal developments, cargo laydown area expansions, and dock improvements. Shallow Draft Ports Projects are federally authorized construction projects for Ship Channels $19.7 million waterway deepening and widening. average project Aransas Co. Projects outside the gates improve interchanges and intersections, Navigation District backlog per port Inland Connectivity reduce congestion and improve mobility, enhance safety, improve rail and bridge crossings, and improve pedestrian access. Projects include maintenance , identifying new dredged Authority Gulf Intracoastal material placement areas (DMPAs), and construction for navigation Waterway Gulf of improvements.

Brazos River Floodgates & Colorado River Locks Other GIWW Needs 1. Maintenance Dredging 2. Dredged Material The Brazos River Floodgates & Colorado River Locks are outdated The Corps does not receive adequate Placement Areas structures that contribute to significant safety hazards and navigational delays funding to maintain the GIWW to its Dredged Material Placement Areas, or on the GIWW. Beginning in 2016, TxDOT partnered with the U.S. Army Corps of Port of authorized dimensions. Just one foot of DMPAs, are sites that are authorized to Port Mansfield Engineers to analyze various modifications to modernize these new facilities. The lost draft across the GIWW system increases contain dredged material after it is extracted improvements outlined in the study would reduce bottlenecks and allisions on costs for barge operators by $58.7 million from waterways. New DMPA acquisitions the GIWW that currently cause up to 12-hour-long delays. annually, a 14.8 percent increase in the will be needed over the next several years Port of cost of doing business.4 The average as existing DMPA capacity decreases. The This priority project was authorized by Congress in the Water Resources Harlingen annual cost to maintain the GIWW to cost to ensure that TxDOT can make timely Development Act of 2020. Before construction on the planned improvements its authorized depth is $56 million. In FY acquisitions of future DMPAs is estimated to can begin, the project must receive funding from Congress, which is typically 2020, the U.S. Army Corps dedicated $40.4 be $1.6 million per biennium. done via an Energy and Water Development Appropriations Act. The one-time million—nearly 40 percent less than what is construction cost is estimated at $409.7 million and will be borne entirely by the Barge approaching the Colorado River Locks Port of needed—to maintenance dredging. federal government. along the GIWW. Port Isabel Port of Page 2 Brow nsville Page 3 Re d Ri AR ve r E xp an si NM on

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a W k ink to LA Mi W dla eb R nd st ed to er E Ri AR Texas Ports: Essential to the Economy ch ve TxDOT Maritime Division TxDOT Maritime Division Texas Ports: Essential to the Economy o 3 r Ex pa E n P si NM IC on VOLATILITY IN THE ENERGY MARKETS TEXAS R Percent Change in Energy e V d o k ya During 2019 and 2020, leading producers Saudi Arabia and Russia 5 a g O er Exports from Ports in Texas O a d ( increased exports to increase their world market shares. This increase in supply, k e ! W R Houston ink Beaumont combined with the coronavirus pandemic, caused a decrease in the world demand LNG Petroleum Crude Oil to LA Mi W 150% dla E eb for petroleum and resulted in an oversupplied market. The resulting drop in crude 138 nd P ste to IC r Ec oil prices below the cost of production significantly impacted Texas producers. As Midla ho cho 4 (! nd t o3 E Freeport a result, weekly exports at Texas ports declined by almost half from June 2019 to 100% Jupiter E ( PIC ( June 2020, when exports began to rebound. UNITED STATES 50% The trickle-down effects associated with the volatility in the energy markets 17 TEXAS ( ! !!( Vo and subsequent loss of business impact port revenues over the long term. The 0% k yag LNG Terminals a G er -1 -3 Corpu Os d ( uncertain future for the energy market has had repercussions for future planned -19 ! Operational Cheristi ! R Houston -50% Beaumont pipelines, offshore crude terminals, and LNG export terminals in Texas. -6 ( Under Development E Crude Terminals P I G u l f ! MEXICO C Jan 2019-Dec 2019 (pre-pandemic) Operational Mi o 4 ( o f Pipelines dland to Ech ! Freeport G Suspended M e x i c o It was expected that 2019 and 2020 would be record years for crude pipeline and Jan 2020-July 2020 Jupiter ( ( Under Development ( buildout projects. With the global pandemic, only a quarter of the planned pipeline Jan 2019-July 2020 (overall) ((( Crude Pipelines Brownsville capacity miles were constructed in 2020, and most pipeline construction projects Operational have been deferred to 2021 or later. Without the construction of anticipated (! ( Under Construction ! ! pipelines, the receiving ports (namely, Houston, Corpus Christi, Beaumont, LNG Terminals G Deferred or On Hold Corpus Freeport) may be forced to defer expansion and capital improvement projects. Percent Change in Energy ! Operational Christi Delayed ( Under Development Export Prices from Ports Crude Terminals Deepwater Crude 5 MEXICO G u l f in Texas ! Operational o f Offshore oil terminals can load Very Large Crude Carriers, vessels with drafts too large G Suspended M e x i c o to dock in most Texas ports. Constructing deepwater crude terminals would improve LNG Petroleum Crude Oil ( economies of scale for exporting oil by allowing these largest crude-carrying vessels 20% Under Development 13 12 ((( Crude Pipelines Brownsville to load. Several offshore terminals are planned for exporting oil from Texas, but their sponsors have delayed submitting permit applications because of lower prices and OpeMARITIMErational ADAPTS 0% market uncertainty. The viability of new offshore oil terminals also depends upon the Under Construction -6 Deferred or On Hold construction of additional pipelines to transport crude oil through Texas. The only -20% DelaTOyed NEW REALITIES operational offshore oil terminal in the U.S. was completed in 1981 for imports. -25 -27 -26 -32 -3 PORTS PLAY PIVOTAL ROLE DURING 2020 PANDEMIC LNG Export Terminals -40% -3 Liquefied natural gas (LNG) exports have increased rapidly in the U.S. since the Jan 2019-Dec 2019 (pre-pandemic) While they feature significantly in the state and national Although container vessel traffic was disrupted for several first shipment in 2016, and the two LNG terminals in Texas completed in 2018 economies under normal circumstances, Texas ports months and ports nationwide had challenges maintaining and 2019 now dominate U.S. LNG exports. The expanded Panama allows Jan 2020-July 2020 played a pivotal role during the 2020 coronavirus pandemic efficient operations, Texas ports remained open. Despite efficient shipments of LNG from Texas to East Asia. Six additional export terminals Jan 2019-July 2020 (overall) to keep the U.S. economy afloat through movement of the economic downturn associated with the coronavirus are approved but are not yet under construction in Texas (three near Brownsville, essential goods. Ports brought in medical supplies and pandemic, imports of food and COVID‑19-related items and one each near Freeport, Port Arthur, and Corpus Christi). The expected future pharmaceuticals, food, fuel, and essential consumer goods. remained relatively stable throughout 2020. growth of this market would continue to bring revenues to Texas ports.

Texas ports’ exports of crude oil, petroleum products, and petrochemicals increased over 2019 levels during the first CRUISE “Our essential workers are heroes. They months of 2020, declined during the three-month period have not missed a beat and show up every from May to June, and recovered to 2019 levels from July The pandemic had a significant impact on the cruise industry growth spurred the development of a new Royal Caribbean day to deliver commerce through our port.” to September. Exports of these products from Texas ports around the world. As Texas’ only cruise port, the Port of cruise terminal, which is targeted for completion in September continued despite a short-term collapse in worldwide Galveston has seen tremendous impacts. Prior to the onset of 2022 (a one-year delay). While Royal Caribbean Cruise and -Roger Guenther, Executive Director demand and provided a needed market for the Texas the global pandemic, the was experiencing Carnival Cruises canceled all cruises through February 2021, Port Houston petroleum industry. As a result, Texas ports helped maintain robust growth—cruise revenue accounted for 65 percent the Port of Galveston is prepared to weather the storm Texas income and employment during the worst of the of the Port of Galveston’s revenue and had been increasing through conservative budget measures, like instituting a hiring pandemic-related economic downturn. rapidly through 2019. In 2018, the cruise industry generated freeze, restricting salary increases, and allowing other kinds of $1.51 billion in total direct expenditures to the state’s economy ships to dock at cruise terminals.6 and accounted for $115 million in onshore spending. This

Page 4 Page 5 Texas Ports: Essential to the Economy TxDOT Maritime Division TxDOT Maritime Division Texas Ports: Essential to the Economy EXPORTS AND The has maintained its position as the MARITIME TRENDS AND primary port for imports of steel slab to the Mexican steel EMERGING MARKETS industry, centered in Monterey, Mexico. The steel slab imports are shipped directly from the Port by rail to Mexico. MARKET OUTLOOKS The Port of Brownsville remains the most cost-efficient port Plastic Resins through which to ship American-made steel to Monterey, Change in Month-Over-Month Crude The abundance of low-cost natural gas provides the U.S. with Mexico, but major investments in Mexican ports may result a competitive advantage in the plastic resins export market. TEXAS ENERGY OUTLOOK 7 in a shift of that trade. Oil Production: January-August 2020 The majority of plastic resin manufactured in Texas occurs Despite the market uncertainties that arose during 2020, 15% along the Gulf Coast, in proximity to the ports of Houston and exports of petroleum products, such as oil, gas, LNG, and 10% Beaumont. Port Houston represents a significant share of 5% plastics, are some of the most profitable commodities that U.S. chemical exports, handling approximately one-third of all Texas is the largest producer of cotton in the U.S., are moved through Texas ports. Port activities and priorities, 0% accounting for more than 45 percent of all cotton produced -5% exports in 2019. Prior to the economic downturn associated including planned projects, often shift based on trends in the domestically. Texas exports most of its cotton to China, -10% with the pandemic, annual global plastic consumption was energy market. -15% expected to double by 2030, and investments in polyethylene Turkey, Mexico, Indonesia, and Vietnam; however, some of this is first shipped to other states and exported from ports Crude oil production in Texas increased by nearly 60 percent -20% manufacturing plants were surging in Texas. As of October outside of Texas. With the expansion of the Panama Canal M J F J J M -25% A A 2019, it was expected that construction would begin on seven a n u u e p u a r during the five years before the 2020 pandemic, primarily a y n l b g r y in 2016, more of the cotton produced in Texas is able to il uary e uary ch of light tight oil from the Permian Basin. In December 2015, ust projects in Texas by 2020, which would increase annual be containerized and exported by Texas ports (mainly Port a 40-year ban on U.S. crude oil exports was removed, and production capacity by 5.1 million metric tons. Despite the Houston), as opposed to another domestic port. From 2015 Houston and Corpus Christi became the leading ports for economic slowdown, one polyethylene plant was opened to 2019, the amount of Texas cotton exported from maritime U.S. crude oil exports. These exports provided an essential in 2020. However, plants in Bayport and Corpus Christi that ports increased by 78 percent, while the cotton exported market for increased crude oil production, as Texas refineries were due to open by 2022 are expected to be delayed. 7 from land ports of entry decreased by 31 percent. As a are not configured to efficiently refine this light oil. Crude Oil Production: 2019-2020 Crude Oil 2019 Crude Oil 2020 result, Texas ports have an increasingly critical role in the 25.0 Steel global cotton supply chain. Natural gas is a byproduct of tight crude oil production, and Tianjin Pipe Corporation has invested $1.1 billion for a new the domestic natural gas market has been oversupplied, 20.0 steel pipe manufacturing facility adjacent to the La Quinta Cotton Movements through Texas by resulting in historically low U.S. prices. Texas has the largest Channel of the Corpus Christi Ship Channel. The steel 8 refinery capacity of any state, located primarily near Texas 15.0 Mode (metric tons) pipe produced will provide an alternative to imported steel Texas Cotton Exported from Maritime Ports ports, and its refineries export a significant portion of their 10.0 pipe for the Texas petroleum industry. The new, $1 billion Texas Cotton Exported from Land Ports of Entry production. LNG is now efficiently shipped overseas from Voestalpine Co. direct reduction facility, which is also 600,000 two Texas ports, increasing the available market for Texas 5.0 adjacent to La Quinta Channel, will process iron ore imports natural gas. from Brazil into sponge iron for export and for domestic 500,000 D J N F M A M J O J A 0 S a n u u e e p u e o c a r a y use. Steel Dynamics Inc. (SDI) is nearing completion of a n l b p g c r y t v 400,000 i u o e r c l e u t e u e a r b h m m s $1.9 billion flat rolled steel mill in Sinton, Texas which will a r m

Crude Oil Production in 2020 e t y b b r y b 300,000 e e import iron ore through the Port of Corpus Christi. In 2021,

In spring 2020, the worldwide demand for crude oil collapsed e r r r because of the pandemic, and U.S. producers could not SDI will have the only flat rolled steel mill in the western U.S., 200,000 decrease supply fast enough to offset the decline in demand. and this facility is expected to facilitate the development of The resulting shortage of storage capacity caused a negative steel-related industries in the region. These three facilities 100,000 price for near term crude oil deliveries. During this extreme were constructed in Texas because of low-cost natural gas 0 market turmoil, crude oil tankers at Texas ports took delivery Natural Gas Production: 2019-20207 and access to the Port of Corpus Christi. 2015 2016 2017 2018 2019 of large amounts of crude oil until a market could be found, Natural Gas 2019 Natural Gas 2020 helping absorb some of the impacts of market fluctuations on 25.0 Corpus Christi Ore, Iron, and crude oil production. 8 20.0 Steel Exports ($ x 1,000) “Intermediate- and long-term projections 400,000 Natural Gas Production in 2020 15.0 350,000 by third‑party market analysts still Natural gas production in Texas increased and declined in 300,000 show PCCA providing between 35 and 10.0 tandem with crude oil production, with the worldwide demand 250,000 55 percent of the U.S. energy export for LNG declining in early 2020. Exports of natural gas require 5.0 200,000 capacity.” major multibillion-dollar investments in LNG facilities. Two 150,000 J M F A M J J A O N 0 S D a n Texas LNG facilities increased export capacity during the u u

e -Jeff Pollack, Director of Planning e p u e o c a r a y 100,000 n l b p g c r y t v i u o e r c l u t e e

past few years, and more capacity is under construction. u e a r b h m m s 50,000 Port of Corpus Christi Authority (PCCA) a r m e t y b b r y

An abundance of natural gas in Texas has driven investment b e e

e 0 r r in plastic resin, steel, and chemical production, mostly near r 2020 2015 2016 2017 2018 2019 2020 Texas ports with an intent to export the products. Proportional Proportional

Page 6 Page 7 Texas Ports: Essential to the Economy TxDOT Maritime Division FUNDING NEW PORT INFRASTRUCTURE AND MAINTENANCE To enable economic growth for domestic and foreign trade, Texas ports must regularly upgrade their infrastructure. SOURCES OF DIRECT However, Texas ports and navigation districts face continual STATE FUNDING challenges to raise funds to consistently maintain channel FOR PORT IMPROVEMENTS depths, improve facilities, and construct new projects. (GULF AND SELECT EAST COAST STATES)9,10 Since 2015, the State of Texas has awarded between $10 General Transportation Bonds (General, and $20 million in Port Access Improvement Program grants U.S. STATE Revenues Fund Environmental) annually, which ports can use to fund infrastructure projects on Alabama publicly-accessible roads “outside the gates” of port property. • Federal multi-modal grant opportunities, such as the FAST Act, Florida INFRA program, and BUILD program, are also available to fund • • • a variety of transportation projects, including those for seaports. Louisiana These grant programs are highly competitive, and Texas ports • • compete with projects from across the U.S. for funding. Maryland • Texas ports also compete with other U.S. ports that receive Massachusetts state‑funded subsidies to attract new tenants. Many ports • • outside of Texas have access to grants or low-interest loans Mississippi through general revenues, economic development funds, tax • • incentives, or transportation programs. These subsidized port Pennsylvania enhancements can make non-Texas ports more attractive to • • shippers and potential tenants, luring firms, trade, and jobs Virginia • away from Texas. The Future for Texas Maritime Transportation The maritime transportation system is an economic engine for the state and the nation, having a critical role in the movement of domestic and foreign trade. Despite the economic downturn caused by the 2020 global coronavirus pandemic, activities related to the petroleum petrochemical, LNG, plastics, steel, and cotton industries have begun to rebound since the middle of 2020. In particular, investments in polyethelene, LNG, steel, and cotton industries in Texas have been on the rise. The cruise industry has not yet been able to resume operations, but is geared to reopen in 2021. Texas ports played a key role in light of the pandemic—keeping workers employed, providing critical storage capacity for excess petroleum product, and allowing normal operations to continue for shipping, fishing, manufacturing, and other key market sectors.

References 1. Texas Ports Association, 2019. 2018 Economic Impacts of the Texas Ports on the State of Texas. 2. Waterborne Commerce Statistics Center, 2020. The U.S. Coastal and Inland Navigation System - 2019 Transportation Facts & Information. 3. USA Trade Online, 2020. United States Census Bureau, U.S. Department of Commerce. 4. Texas Department of Transportion, 2018. 2018 Gulf Intracoastal Waterway - 86th Legislative Report. 5. USA Trade Online, 2019-2020. U.S. Census Bureau, Economic Indicators Division. Texas Port Crude Oil Monthly. 6. Ferguson, J. April 2020. Port of Galveston adjusts books, assumes cruises are done for 2020. . 7. Railroad Commission of Texas, 24 Sept 2020. Texas Monthly Oil & Gas Production; AECOM analysis. 8. USA Trade Online, 2015-2019. U.S. Census Bureau, Economic Indicators Division. Port Level Exports; AECOM analysis. 9. Texas A&M Transportation Institute, May 2015. Survey of State Funding Practices for Coastal Port Infrastructure. 10. Boswell-Ebersole, A. and T. Ankersen, 2013. State Funding for Ports: Selected State Summaries and Links to Resources. Maine Sea Grant. Page 8