Trans-National Commercial - Industrial

TRANS-NATIONAL COMMERCIAL - INDUSTRIAL DEVELOPMENT PROSPECT Quietly nestled within the tranquil town of Presidio, Texas lies a unique opportunity for the development of a commercial – industrial complex perfectly positioned to take advantage of rapidly increasing interest in international commerce in this remote region. Brief History and Background of Presidio - Ojinaga Presidio and its sister city of Ojinaga, Mexico are located at the confluence of the Rio Grande and Rio Conchos in the middle of the Chihuahuan desert. The community is ancient by U.S. standards, with the surrounding area being the oldest continuously cultivated area in the United States. Indigenous farmers have lived at Presidio since 1500 B.C. and by 1400 A.D. the area Indians lived in small pueblos along the river. The first European to arrive was Cabeza de Vaca, reaching Presidio in 1535. The Spanish began to settle the region and were the only foreigners until the first wave of white settlers came to the area after the Mexican war in 1848. Even so, it was largely Comanche territory until the end of the century when it fell into the hands of Pancho Villa in 1914. The advent of modern civilization came with the arrival of the Kansas City, Mexico and Orient Railway in 1930. In 1986, the Texas Department of Transportation replaced the old wooden bridge on the Rio Grande with a 7 span, 2 lane bridge that greatly expanded Presidio as a the only port of entry between El Paso and Del Rio – a distance of some 380 miles. The economy has traditionally been agriculturally based with cattle being the major export from Mexico and produce such as cantaloupe and onions representing the largest part of crops on the irrigated land on both sides of the river. The farming activity on the U.S. side has all but ceased while farming on the Mexico side continues to expand, with some 40,000 acres recently being added to arable land. For the most part, the area has remained isolated and untouched by the NAFTA related development seen in other cities along the border. Until now, the Presidio – Ojinaga crossing has been very quiet, but efforts have been underway to change that significantly in the not-too-distant future. Recent and Current Events Related to Commerce The first definitive effort by the federal government to develop the port came in 1997 when the Intermodal Surface Transportation Efficiency Act designated a trade corridor named “La Entrada al Pacifico”. The cooperative trade corridor extends from Topolobampo, Sinaloa on the Pacific Coast through Presidio, up through Midland-Odessa and on to Amarillo, Wichita Falls and Dallas. The initial project was conceived to assist local Mexican power companies in the regional conversion from coal to natural gas and increase efficiency of import/export logistics as well as promoting and expanding trade between the neighboring nations. Natural Gas Initiative With the completion of the 42” Trans-Pecos Pipeline made by Energy Transfer Partners in 2017, the U.S. portion of the natural gas project was completed. The line interconnects with major interstate and intrastate lines at the Waha Hub, which is the central distribution point for gas produced in the Permian Basin. The pipeline extends south through Fort Stockton then passing near Alpine and Marfa, finally crossing the U.S.-Mexico border just north of Presidio. It is capable of delivering up to 1.4 billion cubic feet per day to Mexico; where the market was recently opened up to private companies, spurring significant investment in distribution. TransCanada has completed the Matzalan – Topolobampo – El Encino pipelines that connect points along the Pacific Coast to a hub near the city of Chihuahua. Construction of the final stretch of line between El Encino and Ojinaga was recently completed by Gasoducto de Aguaprieta, a subsidiary of IEnova, a private transmission company. That completes the connection between the TransCanada lines and the Trans-Pecos line, opening the entire Northern Mexico market to natural gas from the Permian Basin. (See the map below). Although the direct economic impact of this part of the development plan on the Presidio-Ojinaga economy is quite limited, it is significant in that milestones in the overall plan have been made and have been reached. Further, longstanding resistance to development from residents of the Big Bend has been formidable, but now seems not to be insurmountable. That may indicate that the other parts of the development plan could take place at an accelerated pace. (See http://www.naturalgasintel.com/articles/109845-texas-to-mexico-trans-pecos-pipeline-nearing-in-service, http://www.naturalgasintel.com/articles/110521-transcanada-northwestern-mexico-pipeline-to-be-finished- this-year, and https://www.pointlogicenergy.com/market-news/Get-the-Point/2017/2017-5-24-mexico- gas.html. ) Natural Gas Pipeline Highway Natural Gas Pipeline under Construction Railroad The Highway System Initiative After the significant upgrade of the international bridge in 1986, development of the highway system has been quite slow. There was a substantial improvement made for commercial traffic on the Mexico side in 2003, when a bypass was constructed between Hwy 16 and Hwy 67. Hwy 16 is the main road between Ojinaga and Chihuahua, but travel on this road was quite slow as it passed through Peguis Canyon and had many sharp curves and steep grades. The bypass connects from Hwy 16 at El Huerfano to La Mula on Hwy 67, eliminating a time consuming and dangerous part of the trip between the two cities. On the U.S. side, a bypass was constructed to improve the flow of commercial traffic by rerouting it away from downtown Presidio and improvements were made to reduce curves and grades in the area around Shafter as well. Recently the pace has accelerated, with TX DOT sponsoring a $10 million expansion of the International Bridge between Presidio and Ojinaga in order to facilitate commercial traffic flows. The Presidential permit was approved in June of 2017 and the new bridge is under construction. Once it is completed, the existing bridge will be replaced, providing two traffic lanes in each direction. In anticipation of the change, the Presidio International Port Authority was formed to oversee operations and set and collect tolls. (See https://hurd.house.gov/media-center/in-the-news/txdot-funds-new-lanes-presidio-ojinaga-bridge, and https://hurd.house.gov/media-center/press-releases/presidio-port-entry-receives-presidential-permit-start- construction. ) The next step in the process is now starting to take shape, with TX DOT creating a US 67 Corridor Master Plan (CSJ# 5000-00-116). The agency held public meetings in May of this year in Fort Stockton, Alpine, Marfa and Presidio to begin introduction and rollout. The goal is to identify long term strategies for growth anticipated along the route from Presidio to the junction with Interstate 10 just west of Fort Stockton. From those studies, funds will be allocated to make the changes identified. (See https://www.txdot.gov/inside-txdot/projects/studies/el-paso/us67-i10-presidio.html, and http://ftp.dot.state.tx.us/pub/txdot/get-involved/elp/us-67/040518-presentation.pdf. ) The Railroad Initiative The once formidable trade facilitated by the railroad has dwindled over the decades as the line changed ownership numerous times. In the 1970’s the export of tractors, harvesters and other farm equipment was a huge business, with the rail returning with cattle and machine parts. Tourism was flourishing, with many people interested in taking the trip down to Topolobampo through the Cañon del Cobre (the Mexican Grand Canyon). By the 1990’s the line became extinct as the South Orient Railroad went bankrupt and abandoned the line. To make matters worse, in 2008 an arsonist set fire to the north end of the bridge, causing extensive damage and effectively closing the bridge. (see http://cs.trains.com/trn/b/fred-frailey/archive/2014/02/22/at-the-end-of-the-line.aspx. ) The future of the line altered course in 2001, when the State of Texas bought the line and entered into a 40 year lease with Texas-Pacifico Transportation, a subsidiary of Grupo Mexico, the largest copper mining company in Mexico with the largest copper reserves of any company in the world. That effort would have failed as well, except for two factors. The first was an investment of nearly $36M by the TX Dot to rehabilitate the infrastructure so that the line became viable again and the second was the fracking boom that hit the Permian Basin, giving Texas-Pacifico a huge revenue stream related to the hauling of sand needed in fracking operations. (see http://ftp.dot.state.tx.us/pub/txdot-info/rail/south_orient/rehabilitation.pdf, and http://www.texaspacifico.com/docs/TXPF_PRESENTATION_OFFICIAL.pdf. ) TX Dot continues to invest heavily in the line and in August of 2017, TX Dot received a $7M grant to be used along with an investment by Texas-Pacifico of $9M, for the reconstruction of the Presidio-Ojinaga Rail bridge and repair of the Alpine-Presidio section of the line. (see https://hurd.house.gov/media-center/in-the-news/grant-will-rebuild-presidio-railroad-bridge-ojinaga, and https://ftp.dot.state.tx.us/pub/txdot-info/fed/fastlane/2017/south-orient-application.pdf. ) Under the lease, Texas-Pacifico is required to maintain the infrastructure as improved by TX Dot, alleviating future maintenance costs. It is TX Dot’s goal to divert about 45 million truck miles to train miles over the next 20 years. TX Dot’s cost benefit analysis shows a total 20 year benefit of about $86M in 2015 dollars.

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