Houston's Ship Channel Is Big Business

SHIP CHANNEL PORT DIRECTOR COULD SEE ROGER GUENTHER NEW WAVE OF HAS NO TIME EXPORTS FOR RED TAPE 9C 8C

OCTOBER 31-NOVEMBER 6, 2014 • SECTION C

SPECIAL REPORT HOUSTON’S SHIP CHANNEL IS BIG BUSINESS

THE LARGEST PORT IN THE NATION IS IN YOUR BACKYARD, AND IT’S GETTING BIGGER. HERE’S WHO’S DOING BUSINESS AT THE HOUSTON SHIP CHANNEL.

MARITIME POWERHOUSE: CAN YOU DIG IT? A DAY IN THE LIFE OF 100 YEARS IN THE DREDGING BRINGS DEEPER A HOUSTON PILOT 10C MAKING 4C OPPORTUNITIES 9C

PLUS: THE BUSINESS JOURNAL INTERVIEW WITH JANIECE LONGORIA 10C 2C HOUSTON BUSINESS JOURNAL OCTOBER 31-NOVEMBER 6, 2014 SPECIAL REPORT FROM THE PUBLISHER

Th e Houston Ship Channel is an economic behemoth that seldom gets its due when credit is handed out for Houston’s boom times. Yet, this bustling waterway connects Houston to the world and moreso every day. In fact, it has a tremendous ecomomic impact on the entire state — $178.5 billion, to be exact. Th e Houston Business Journal is proud to be a part of the centennial celebration of the Houston John Beddow, Ship Channel. We hope the interviews and stories Publisher, Houston in this special publication bring to life the quiet, Business Journal unassuming global pathway that lays at our door. We hope, after reading this, you come away with a clearer understanding of how impactful the channel is to Houston’s economy — now and in the future. Th ank you to Promote Houston Ship Channel 2014 Inc. for supporting HBJ’s coverage of the ship channel and for unlocking this special edition to all readers. You can ﬁ nd these stories at HoustonBusinessJournal.com. We invite you to share them with a colleague and spread the word about Houston’s maritime gem.

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PromoteHoustonShipChannel2014.org 4C HOUSTON BUSINESS JOURNAL OCTOBER 31-NOVEMBER 6, 2014 SPECIAL REPORT HOUSTON: THE TOWN THAT BUILT THE PORT, WHICH BUILT THE CITY

COURTESY

BY NORA OLABI [email protected] “You must have known that the end of the war t’s no secret — Houston has been getting a would come before a world commerce would pour lot of love these days — lists around every Icorner shower the city with accolades. through your ship channel; yet you have made all But beyond superfi cialities, Houston is the Energy Capital of the World, is home to ready for that world commerce when it does come. the second largest petrochemical complex Th at is faith — and faith conquers worlds.” in the world and is the largest U.S. port in terms of foreign waterborne tonnage. HOUSTON POST, Nov. 21, 1917 Houston’s success story isn’t one of over- night riches. Rather, waterborne commerce has been central to the creation of Houston the U.S. After oil was discovered in nearby THE BACK STORY banks increased from few million in depos- as a global marketplace since the speculative Spindletop in 1901 and, later, in Humble, Prominent, local historical figures like its to $350 million, according to Feagin. real estate developers and brothers John K. Houston would position itself as a major Charles Morgan and John Th omas Brady and Augustus C. Allen settled on the banks oil and gas production center. By 1919, diligently worked to fund dredging proj- PANAMA CANAL AND THE of the Buff alo Bayou in 1836. 75 percent of Gulf Coast oil was coming ects in the Houston Ship Channel during FUTURE OF THE PORT Long before the 52-mile Houston Ship from fi elds surrounding the Houston area. the 19th century to allow for heavier ships A feat of engineering ingenuity, the Pan- Channel was deepened to 45 feet and Again, the Port of Houston would serve to sail through into the Port of Houston. ama Canal has increased the pace and expanded to become properly navigable, as a critical part of its rise as a global city But after local Congressman Th omas H. decreased the cost of global, waterborne the most important port city on the Gulf by connecting it to markets around the Ball became a member of the U.S. Rivers transportation. Coast was Galveston. But as the coast- world. and Harbors Committee in 1897, momen- Th e man-made canal was completed in al city’s infrastructure continued to erode tum for the development of the ship chan- 1914, within a month of the completion of from the onslaught of hurricanes from the A NEW WORLD nel went full speed ahead. Th ough Con- the 25-foot dredge project in the ship chan- mid-1800s leading up to the Great Storm of Both the Allied and Axis powers heavily gress approved funding to dredge the port to nel, after a decade of American leadership 1900 — the deadliest hurricane in U.S. his- relied on new, mechanized weapons in depths of 25-feet, almost a decade later, the on the project. Th is canal has been a major tory — local business leaders looked to min- World War I to overwhelm each other — port was only at 18 ½ - feet deep. Frustrated force in creating a connected global mar- imize potential risk caused by an exposed armored cars, tanks, aircrafts and chem- with the pace, Ball and Houston Mayor Hor- ketplace by reducing the distance from one coastal port. A viable alternative was still in ical warfare. Mechanized weapons relied ace B. Rice led a delegation to present the side of the Americas to the other, from the the works: the Port of Houston. on oil, and Th e Port of Houston became “Houston Plan” to Congress in 1909. Th ey Atlantic to the Pacifi c. “Texas is a land of agricultural bounty critical in its exportation to fuel the Allied proposed to Congress that Houstonians After almost 100 years since the comple- that the early settlers soon exploited. Th e and American forces, which entered the pick up the tab on half of the project, while tion of the Panama Canal, the new expan- forests of East Texas created great fortunes war during its last year. Th ough funding the federal government would foot the bill sion of the waterway is in its fi nal stages in lumber. Th e year-round growing seasons for ©deep American water development City Business of the ship Journals for the other- Not half. for No commercial port project since use has of completion. Th e Houston Port Author- of the Gulf Coast allowed farmers to grow channel came to a standstill during the been built without guaranteed local fund- ity is funding $80 million for the approved cotton, fruit, vegetables and rice. Vast lands war, which started in 1914, its importance ing since. dredging of Barbours Cut from depths of 40 in Texas were ideal for cattle ranching. Texas to the country’s national security, espe- The Texas legislature allowed Harris feet to 45 feet to support increased traffi c at raised more than it could consume, so farm- cially because of its major role during the County to create a navigation district, allow- the terminal, which handles shipping con- ers and businessmen wanted to trade what war, was realized. ing for the issuance of bonds, and Jesse H. tainer, roll-on, roll-off and project cargo, Texas had for what Texans needed,” Execu- After WWI ended in 1918, the Hous- Jones, local real estate tycoon and banker, according to Guenther. tive Director of the Port of Houston Author- ton Ship Channel was well-positioned as arranged for the sale of the citizen approved He also said that the port would also ity Roger Guenther said. a global port to serve in the development $1.25 million bonds to fund the dredging of expand its Bayport Container Terminal, At the time, Houston’s sophisticated of world commerce. the channel to twenty-fi ve feet deep. noting that it was awarded a $10 million railroad and banking infrastructure — fi ve Decades later, the Second World War Th e ship channel’s dredging was com- Transportation Investment Generating national banks and 17 railroads that met would ravage Europe, and America would, pleted in 1914, just in time for the outbreak Economic Recovery grant. the sea — and its deepwater, inland port again, step in to quell the violence. Th is of World War I. Th ough movement to dredge “Someone once said that “Houston is the led it to become the center of the cotton time, not only was oil vital to the war it to serve deepwater vessels slowed during town that built the port that built the city”. trade, with one-third of the world’s cotton eff orts, but synthetic rubber based on a the war, the U.S. Chamber of Commerce Th e Houston Ship Channel is a vibrant eco- production fl owing through it, accord- byproduct of petroleum and other chemi- that approved the U.S. Board of Engineers’ nomic engine that continues to stimulate ing to Texas A&M University Professor cals were inspired by the war. Jesse Jones, recommendation to deepen the ship chan- our regional economy,” Guenther said. of Sociology Joe Feagin in his book “Free who served under Franklin D. Roosevelt nel to 35-feet at mean low tide and 800 feet Time and time again, local business Enterprise City.” Cotton from Oklahoma, as Secretary of Commerce during the across, according to the January 10, 1918 leaders to U.S. representatives have known Arkansas, Louisiana and Texas came to war, helped bring petrochemical manu- reportage in the Houston Post. the importance of navigable waterways the sheds and compresses at the Port of facturing to the Port of Houston, which is From the late 19th century to the oil and waterborne commerce for the devel- Houston to be stored and processed before the largest petrochemical complex in the boom fueled by World War II in the ’40s, opment of sustainable communities and a being shipped off to Europe and the rest of country to date. bank deposits in Houston’s fi ve national stronger country. OCTOBER 31-NOVEMBER 6, 2014 HOUSTON BUSINESS JOURNAL 5C SPECIAL REPORT EXPANSION Texas oil giants stake out territory on the Houston Ship Channel

BY NORA OLABI [email protected]

Houston has been synonymous with oil since it was discovered in Spindletop, Tex- $35 as, in the early 20th century, and that repu- tation still holds true. billion Domestic oil production has increased How much public and private dramatically due to huge shale plays, par- investments have been made ticularly in regions across Texas. Th e oil on the Houston Ship Channel coming out of the ground is quickly being sent south toward refi neries dotting the Gulf Coast, and Houston is one of the top $71 contenders. To keep up with the ever—increas- ing energy demands from industry and billion The worth of petroleum and consumer dependence as well as future petroleum product imports demand from a growing global popula- and exports handled at the tion, the big dogs of the energy industry Port of Houston in 2013 are spending billions to build and expand facilities on the Houston Ship Channel. Companies like Exxon Mobil Corp. 70% (NYSE: XOM), Chevron Phillips Chemi- The amount of freight moved cal Co. and Kinder Morgan Energy Part- by ship worldwide. ners LP (NYSE: KMP) are ramping up their footprints. Approximately $35 billion worth of pub- THINKSTOCK lic and private investments are expected up the world. But now, it’s most economical Corp. Oil and natural gas liquids are used world’s largest ethane export terminal to and down the channel, particularly in the to build those facilities here because of the as raw materials to create ethylene, propyl- the Houston Ship Channel. Th e company oil and gas and petrochemical industries. price of feedstock that we have,” said Chad ene, butane, ethane and other chemicals signed a 30-year agreement with POHA Th e Houston Ship Channel is at the Burke, president and for plastics, olefi n, aromatic and chemical for its refrigerated ethane export facili- logistical center of the growth. Th e glob- CEO of the Economic manufacturing. ty in Houston to build off of the ongoing al maritime shipping industry ships about Alliance Houston Port Just north of Exxon Mobil’s Baytown domestic shale boom. Enterprise also plans $13 trillion of goods a year, which is about Region, a non-prof- operation rests another industry heavy hit- to build a pipeline from its Mont Belvieu 70 percent of total freight, according to the it dedicated to region- ter: Th e Woodlands-based Chevron Phillips natural gas liquids fractionation and stor- World Trade Organization. At the Port of al economic develop- Chemical Co. Chevron Phillips is expand- age complex to provide direct access to the Houston, the public wharf that sits at the ment around the port. ing its Baytown and Old Ocean locations ethane supply. It’s expected to begin opera- mouth of the channel and was the driving Irving, Texas-based at a combined cost of nearly $6 billion for tion in 2016. force behind its construction, petroleum Chad Burke Exxon Mobil Chemical a company with $10.5 billion in existing and petroleum products were by far the Co., the chemical arm assets. Dubbed the Gulf Coast Petrochem- ENERGY SPURS leading import and export commodities by of the global energy icals Project, it includes two polyethylene OTHER SECTORS both tonnage and dollar value in 2013, with company, is investing in a multi-billion facilities and an ethane cracker. Construc- All of the chatter on the channel means a combined value of $71 billion, according dollar ethane cracker at its Baytown loca- tion is expected to be completed in 2017. greater economic activity in Houston and to the U.S. Department of Commerce. tion. Th e facility, which sits on 3,400 acres, the surrounding region and greater job is the© nation’sAmerican largest City integrated Business refi ning Journals BIG OIL - Not for commercial use opportunity, and entrepreneurs from all EVERYTHING IS complex, according to the Offi ce of the BIGGER THAN EVER sectors are prospering from the growth in BIGGER IN TEXAS Governor. More than 7.2 billion pounds Th e 52-mile Houston Ship Channel is the energy industry. Petrochemical plants requires natu- of petrochemical products are manufac- home to nearly 8 percent of U.S. refi ning Th e retail, convention and hospitality ral gas, oil and coal to produce the build- tured at the Baytown facility, according to capacity, and with that comes the middle- industries are booming from the increased ing blocks of almost all modern consum- the company. Th e ethane cracker is expect- men of the oil industry: pipelines and stor- population and tourism. Commercial and er goods. Everything from communication ed to increase its steam-cracking capacity age tanks. residential real estate has exploded as cor- devices to medical sterilizers is produced by 1.5 million tons per year and is expected Houston-based Kinder Morgan Energy porate campuses, headquarters and logis- from a product of the petrochemical to be completed by 2017. Partners LP and Denver-based TransMon- tic centers are erected around the great- industry. “Th e project is made possible in large taigne Partners entered into a joint venture er Houston area and people from across Shale oil production has shot up and part by abundant, aff ordable supplies of to construct and operate an oil storage cen- the country move to the city for job the price of petrochemical feedstock has U.S. natural gas for energy and chemical ter on 185 acres near the ship channel. Th e opportunities. dropped in the U.S., so many companies feedstock,” said Steve Pryor, president of joint venture called BOTSCO is expect- Th e channel itself directly impacts the are looking to heavily reinvest in their Exxon Mobil Chemical Co. “Shale developed to have 51 storage tanks, a two-berth region by bringing in $52.1 billion in tax domestic operations. Houston is home to ment has provided U.S. chemical produc- ship dock and 12 barge berths. Th e tankers revenues nationwide and has a statewide the second largest petrochemical complex ers a double benefi t as an energy source will be able to store sulfur diesel, residual impact of $178.5 billion. in the world, only second to Rotterdam, and as a key raw material to make plas- fuels and other black oil terminal services. “As our population grows — and it’s Th e Netherlands. tics and other essential products, creating BOTSCO is the fi rst greenfi eld terminal to growing at a very rapid rate here in the “Before this renaissance because of the jobs and economic activity across the val- be built at the Port of Houston in more than Houston area — correspondingly, we will abundance of natural gas, we were trying ue chain.” 25 years, according to the Port of Houston continue to import at greater and greater to convince (companies) to stay here versus Th e petrochemical industry represents Authority. numbers to meet or satiate that demand,” … Singapore, the U.K., Asia and Saudi Ara- about 60 percent of the global oil and gas Meanwhile, Houston-based Enter- Burke said. bia. We were losing those battles to around consumption, according to Exxon Mobil prise Products Partners LP is bringing the 6C HOUSTON BUSINESS JOURNAL OCTOBER 31-NOVEMBER 6, 2014

HOUSTON’S OPEN CHANNEL to the WORLD

FOR 100 YEARS, THE HOUSTON SHIP CHANNEL HAS BUILT A DEEP CONNECTION BETWEEN THE CITY AND THE WORLD. Stretching longer than the Panama Canal, the ship channel now welcomes more ships and goods than any port in the nation. That’s a centennial achievement Houstonians can take pride in.

PromoteHoustonShipChannel2014.org OCTOBER 31-NOVEMBER 6, 2014 HOUSTON BUSINESS JOURNAL 7C

READY to NAVIGATE a NEW CENTURY

IN NOVEMBER 2014, THE HOUSTON SHIP CHANNEL WILL CELEBRATE 100 YEARS AS A DRIVING FORCE BEHIND HOUSTON’S ROBUST ECONOMY. Today, the ship channel puts over $56 billion of buying power in the hands of Texans. That’s a centennial achievement that bodes well for Houston’s next century.

PromoteHoustonShipChannel2014.org 8C HOUSTON BUSINESS JOURNAL OCTOBER 31-NOVEMBER 6, 2014 SPECIAL REPORT

THE BUSINESS JOURNAL INTERVIEW WITH... Roger Guenther, executive director, Port of Houston Authority

BY NORA OLABI Roger Guenther sees R THE GUENTHER FILE [email protected] great opportunity at Title: Executive director, Port of the Port, thanks to Houston Authority After 26 years at the Port the energy boom. & of Houston Authority, Age: 54 Q Roger Guenther has been Hometown: Baytown A involved in all aspects Education: Mechanical engineering of the Port of Houston’s degree from Texas A&M University, operations, including the MBA in international trade and finance from the University of St. Thomas masterplanning of the Bayport container Family: Wife, Fabiana, and two kids terminal and the redevelopment of the older Barbours Cut container terminal. Hobbies: Avid sports fan and ardent supporter of his alma mater. He also Former Executive Director Leonard enjoys hunting, fishing and golfing. Waterworth resigned in January after two years in the post, and Guenther, the deputy director at the time, was named the permanent replacement soon fourth largest city in the nation. It’s one afterwards. Guenther worked his way of the fastest-growing regions in the up from a crane engineer to executive nation, and for those reasons, we expect director of POHA, overseeing port-wide to not only experience growth in import maintenance, construction projects, and opportunities through the Panama Canal real estate interests at the port. With all of but in exports with the renaissance from the energy sector. We’re going to see the capital investments underway at and CHRIS CURRY/HBJ growth that is very signifi cant over the around the ship channel, the expansion vision? Th e Houston Ship Channel the Panama Canal. We’re already seeing next three to fi ve years. of the Panama Canal and channel has helped the Port of Houston be an ships that are currently too large to go It’s generated here. It’s manufactured dredging at both Bayport and Barbours important economic driver for the through the Panama Canal. We have here. And also the imports of consumer Cut, Guenther has a lot to keep up with. region, state and nation for 100 years to plan for capacity to export products retail goods are going to be in higher as a deep-water port, and I see that that are going to be produced and demand because more people are here. What was your path to becoming continuing well into the future. manufactured here in the port region. We believe that with the expansion of executive director of the Port Authority? So it’s more than just pouring concrete the canal, with Houston’s ability and the I knew that there was always a goal out Since you’ve been at the port for almost and building physical capacity. We have dimension of the deeper water and the there. I worked hard, went back and three decades in various roles, what’s to continuously improve the processes larger cranes, we have the opportunity got my MBA, learned more and more something that you’ve learned from so we can handle that cargo effi ciently to be the gateway to the heartland of about the operation and the container your experience that you wouldn’t through our terminals. America. terminals, and the more you learn and have otherwise? Without a doubt, it’s apply yourself and get involved, the understanding the customer needs. What’s the plan to increase capacity What projects are you currently more value you give to the organization, Th e main thing that has allowed me to at the port? We expect to get 30 to 40 overseeing? We have begun work on an the more satisfaction you get from your sit in this chair and take off running percent more capacity out of Barbours $80 million project — raised from POHA job. with a smooth transition was my Cut after we redevelop. We continue to revenue — that includes the deepening understanding of the business of the refi ne processes of moving containers and expansion of the federal channels How would you describe your Port of Houston Authority. At the end in and out of the gate. Th e less time a accessing our container terminals at leadership style? It’s a very open of the day, we are a governmental entity container dwells on a facility and the Barbours Cut and Bayport. Th e need relationship. I believe my style is that licensed by the state of Texas. However, quicker you can get it, then you can for this work is so critical that we have I have the trust in those who report to the business of the port generates a minimize the footprint you need to © American City Business Journals - Not for commercial use taken the initiative of self-funding the me as well as depend on the leadership lot of revenue that we take the results handle that container. Th e greater the project, instead of waiting the possible and accountability of those reporting from and turn it back into more capital increased throughput velocity, the better 15 years it would normally take for the to me. And in return I give them the investments to create the ability to grow utilization of your footprint and the less federal government to fund the project. responsibility to do a lot of things. cargo and more jobs. capital investment you have to make per Work at Barbours Cut began in late July, It’s fl atter than vertical in terms of Our strategy is dependent on the container. and we have received fi nal approval on structure; I’ll talk to anybody. If you’re needs of our stakeholders. We have to our permit for Bayport. We anticipate not understanding everyone in the make sure that we have a short-term, Th e Port of New Orleans seems to be the dredging to be completed by the organization, it’s going to limit your near-term and long-term plan to capture a strong contender on the Gulf Coast, summer of 2015. ability to grow as an organization and as the cargo that needs to come to or leave especially for containerized cargo. How In addition to the dredging, we are a leader. Houston. does the Port of Houston Authority making substantial investments in the expect to continue to be an attractive expansion and refurbishment of our As the new executive director, what do What do you think is your greatest choice? I’m not going to comment docks and container yards, as well as you have in store for the future? Th at’s challenge? Th ere are many physical on other port strategies — I know our in larger cranes at Barbours Cut that pretty simple. Working with the Port project challenges that are ongoing, strategy and our opportunities are such are expected to be delivered in the fi rst Commission, I hope to ensure the Port but I think the greatest challenge and that this region the industry that has quarter of next year. Bayport is about 50 Authority will continue to work to play opportunity is to make sure our staff developed here and the increased capital percent complete, and we continue to a key role in the economic expansion has the right direction from me. Th e investment on development here in this expand it as market demand dictates. We that drives growth for our region and dredging is sort of obvious. It’s the region — is going to develop a lot more are also making substantial investments economy. renaissance of the energy industry that is cargo. in our traditional cargo-handling driving most of our opportunities going Th e Port of Houston Authority facilities at our Turning Basin terminals. Where do you see the Houston Ship forward. handles 66 percent of the containerized Channel in 10 years? What’s your We’re expanding facilities, not just for business on the Gulf; Houston is the OCTOBER 31-NOVEMBER 6, 2014 HOUSTON BUSINESS JOURNAL 9C SPECIAL REPORT INFRASTRUCTURE Houston Ship Channel digs deep

BY NORA OLABI sheer volume. [email protected] To speed up the channel dredge projects, the Port of Houston Authority bypassed the Th e Houston Ship Channel is at the center of federal process and self-funded it through 66% modern life in Houston. the port’s operating revenues. POHA’s 2013 Th is maritime freeway links everything total operating revenues wad $233.7 million How much of all Gulf Coast from grain and produce to fi ne china to the and its 2014 budgeted operating revenues is container traff ic is handled by the oil that powers the petrochemical manufac- $249.1 million. Port of Houston turing complex, the largest in the country. “Th e need for this work is so critical that But to keep up with the pace of growth, we have taken the initiative of self-funding globally and locally, the Port of Houston the project, instead of waiting the possible THINKSTOCK Authority is digging deep to expand its facili- 15 years it would normally take for the fed- ties and waterways. eral government to fund the project,” said ducted at the request of the Port of Hous- ity typically handles 4,500 TEU vessels, but A $68 million expansion of both Barbo- Executive Director of the Port of Houston ton Authority. it is expecting to handle 8,000- to 10,000- urs Cut and Bayport container terminals Authority Roger Guenther. After the Panama Canal expansion, con- TEU vessels after the canal opens. is underway through Orion Construction Th e ship channel is home to the Port of tainer shipping vessels holding up to 13,000 LP. Th e project will deepen the terminals Houston, the largest port by foreign trade in TEUs — one TEU is equivalent to a shipping FOLLOW THE OIL from 40 to 45 feet, matching the federally the country and the largest by containerized container — will be able to sail between Domestic oil and gas is on the rise, and approved depth of the ship channel, as well cargo on the Gulf Coast. Th e port, located 52 the Pacifi c and Atlantic oceans. Around increased shale in the Eagle Ford, Barnett as widen the terminal berths. Th e expan- miles inland, is responsible for $178.5 bil- 97 percent of container ships in service or and other plays around the state are being sion is, in part, due to the Panama Canal lion in statewide and nearly $500 billion in on order would be able to fi t through the shipped to the Gulf Coast as quickly as possi- expansion, which will impact global ship- nationwide economic activity, according expanded Panama Canal, according to the ping, both on the supply chain end and in to a 2012 study by Martin Associates con- Boston Globe. Th e Port of Houston Author- “DREDGING” CONTINUED ON PAGE 11C

SHALE GALE HOUSTON SHIP CHANNEL COULD SEE NEW WAVE OF EXPORTS

BY JORDAN BLUM it could also lead fewer refi ned products to That includes, for instance, Houston- [email protected] be exports. based Kinder Morgan Energy Partners But the crude and condensate tankers are building a petroleum condensate processing Th e large oil tanker, BW Zambesi, quietly often bigger vessels that take up more chan- facility near its Galena Park terminal on the made history at the end of July when it left nel space. Houston Ship Channel. Th e approximately the Houston Ship Channel and Texas City “We may not see more ships. We’ll see $360 million project is supported by a long- with nearly 400,000 barrels of ultra-light wider ships, deeper ships,” Diehl said. term, fee-based agreement with BP North crude oil, called condensate, for a 40-day Th e larger tankers can be 900 feet long America, based in Houston. trip to South Korea. and 165 feet wide, he said. Th is could hap- Th e Port of Houston is undergoing more Th anks to a recent U.S. Department of pen simultaneously with the manufacturing than $1 billion in upgrades over the next fi ve Commerce ruling, Houston-based Enter- boom and container ships becoming larger, years to prepare for all the growth, Longo- prise Products Partners LP (NYSE: EPD) as well. ria said, including building new cargo con- and Irving-based Pioneer Natural Resourc- “We predict that’s where we’ll see the tainer cranes. es Co. (NYSE: PXD) are the fi rst two compa- bigger ships sooner than later,” Diehl said “We are ready for what’s ahead,” she said. nies with permission to export Eagle Ford of the container vessels. “We are proactive.” condensate, which was banned as part of Right now, fewer tankers are coming into As for the federal debates on condensate the 40-year-old crude oil export ban. Th e the Houston area because the U.S. is import- and crude exports, U.S. Rep. Gene Green, Commerce© American Department City essentially Business ruled, inJournals ing less -oil, Not but formore commercial could soon be need- use D-Houston, said he supports the “reason- some cases, that the condensate is a product ed for exports. Th e exports also should rise able” expansion of condensate exports. and not crude oil. with the expansion of the Panama Canal But ending the crude export ban is a more With the Houston Ship Channel and and quicker shipping times to Asia and complicated issue because so many of the COURTESY southeastern Texas already seeing record elsewhere. Houston region’s refi ners, manufacturers “We may not traffi c thanks to the ongoing shale boom “We look at it as what is the global and chemical producers rely on aff ordable and the upcoming manufacturing surge, demand for energy and for products,” Diehl American resources to make their products. see more ships. condensate exports and the growing debate said. “It will grow.” Even with the ban in place, U.S. crude over ending the crude export ban could lead Diehl said he is confident the Hous- exports recently reached their highest lev- We’ll see wider to even more tankers cruising through the ton Ship Channel will be prepared to avoid el in 15 years, according to a federal anal- Houston region. Pioneer CEO Scott Shef- “traffi c jams” thanks to the preparations and ysis. Most of the exports went to Canada. ships, deeper fi eld told Reuters that the plan is to export dredging in the works. Th e increase in crude exports is largely the 50,000 barrels of condensate a day on aver- “How do you stay safe and effi cient and result of rising U.S. production, which has ships.” age in 2015. environmentally sound? It sounds very reached nearly 9 million barrels per day and Bill Diehl, president basic, but it goes back to communication,” growing. BILL DIEHL, president, Greater Houston Port Bureau of the Greater Hous- he said. Green said there is the potential for a ton Port Bureau, said Janiece Longoria, chairwoman of the Port “slippery slope.” exporting more con- Commission of the Port of Houston Author- “Let’s see if the (export) market is there densate and potentially ity, said at least $35 billion in industry port without driving crude oil prices up for our more crude would not investments are in the works through 2015. refi neries,” Green said. “We want to export necessarily equate to a Port activity in 2014 is exceeding the “record” more, but we also want to keep those down- Bill Diehl lot more traffi c, because performance of 2013, she said. stream jobs down here.” 10C HOUSTON BUSINESS JOURNAL OCTOBER 31-NOVEMBER 6, 2014 SPECIAL REPORT

THE BUSINESS JOURNAL INTERVIEW WITH... Janiece Longoria, chair, Port of Houston Authority

& BY NORA OLABI with her position lends her a unique vantage What’s the Port of Houston Authority’s “Our industry Q [email protected] point and a glimpse into its future. greatest challenge moving forward, partners have considering the Panama Canal expansion? advised us A The chair of the Port of What drew you to the port? Public service Th e biggest challenge continues to be Houston Authority, like her has been a very important part of my maintenance of the ship channel at its that their fellow commissioners, is an professional life, and I’ve always had some authorized width and depth because of exports in the appointed, unpaid volunteer. element of public service in what I do. continual silting. It needs to be dredged short term in Janiece Longoria, who is a commercial It has now become the case that public continuously. two to three litigator and partner at a Houston-based service is taking the majority of my time. Th e only other piece that we law firm, oversees everything from the continuously work on is trying to fi gure years are day-to-day operations to the funding and How do you balance your duties to out how to get a larger share of the federal expected to regulatory standards of the port. But most your law practice and chairman of maintenance tax. People are surprised double or triple out of the Port of important, she guides it with a vision. POHA? I don’t have time to practice law to learn that the uses of our channel Houston Authority.” Since her appointment to the position anymore because this position requires contribute $100 million to the harbor by the Harris County Commissioners Court practically full-time devotion. When I was maintenance tax in something called the JANIECE LONGORIA, chair, and Houston City Council, she has worked a commissioner, it was easier to balance Harbor Maintenance Trust Fund, but it’s Port of Houston Authority on several initiatives. Arguably, the most my law practice. But as chairman, it is not held in trust for Harbor Maintenance. important in the works are the recent dredge very time consuming. So, my partners It’s reappropriated by Congress for projects at the Houston Ship Channel in have been generous with me at the fi rm in maintenance, waterway projects and other THE LONGORIA FILE preparation for the expected opening of the allowing me to discharge my public service. general purposes unrelated to harbors and R Panama Canal expansion in early-2016. Th ey certainly recognize the importance waterways. Rather than seek federal funding for Title: Managing partner at Ogden, of the Port of Houston Authority to the Gibson Broocks, Longoria & Hall LLP, the 5-foot deepening of the Bayport and region from the standpoint of its economic How do you expect to keep up with the independent director at CenterPoint Barbours Cut container terminals, she has impact. pace of commerce? Our industry partners Energy pushed to pull the $80 million from the Port have advised us that their exports in Age: 61 of Houston Authorities revenues, allowing How has your background as a the short term in two to three years are Hometown: Pharr, Texas the ship channel to be ready in time for the commercial litigator helped you in your expected to double or triple out of the Education: J.D. from the University of completion of the Panama Canal expansion position at the Port Authority? I would Port of Houston Authority. Th e staff and Texas School of Law rather than the possible 15 years it would say that all of my life experience has commission are doing everything in its Initiatives started: Dredge Task Force, have taken to cut through the federal red really helped me be an eff ective person in power to assure that it’s ready not only for Citizens Advisory Council and Business tape. this role. Certainly, the ability to analyze the increased exports in the short term, but Advisory Council Longoria started her professional career complex situations and look for solutions what we anticipate to come in increased Ongoing projects: Dredging of Bayport as a commercial litigator before joining for not only the Port of Houston Authority imports with the expansion of the Panama and Barbours Cut terminals, due for completion in the summer POHA has a commissioner in 2002. Her but the diverse stakeholders is a skill set Canal. And we will be ready. institutional knowledge of the port coupled that has served me well.

celebrating its 90th anniversary with the 12:08 P.M. WELCOME, BERMUDA ship channel’s centennial, and the Houston We approached the Stena Penguin, which Business Journal set sail for a day with them raises a Bermuda flag, to pick up two pilots to see what keeps goods flowing, the ship who have completed a job. Typically, only channel ticking and the Houston economy one pilot is needed, but the huge oil tanker running day in and day out. requires two pilots to properly guide it. 8:45 A.M. SET SAIL 12:25 P.M. PREPARE TO BOARD Arrive at the Houston Pilots’ headquarters a Captain couple miles from the banks of the Buff alo Whenever a captain puts in a call to the John Vassar Bayou past Beltway 8 and right off Highway A Day in the Life Houston Pilot headquarters as his or her descends the 225 in Deer Park, Texas. © American City Business Journalsvessel sits - Notat the forsand commercial bar near Galveston, use floating stairs of a Houston Ship the dispatchers send out a pilot to guide on the side 8:50 A.M. NO ROOM FOR ERROR it into the channel and to the appropriate of the ship Channel pilot dock. There are about 150 public and and makes private terminals up and down the channel. his way down the The Houston pilots reign supreme on the rope ladder on the Stena Penguin Hamilton. Houston Ship Channel. Vessels can’t come 11:15 A.M. HOME ON THE SEA Captain Mike Pizzitola soon follows Vassar. across the sand bar in Galveston Bay to Living on a pilot boat and sleeping on the Both have been pilots, before and after enter the channel, nor can they leave or water takes some adjustment, but the pilots joining the Houston Pilots, for several even travel between docks in the ship try to bring the comforts of home with them. decades. channel without one of the 100 men and There are small bunkers, a kitchen, a flat- women from the Houston Pilots. They work screen TV and, most important, a full pantry 1:13 P.M. LAND HO’ every day — rain or shine — guiding ships to feed the busy pilots during their shifts. through the busy, 52-mile channel to ensure all goods are delivered safely. On an average day, a group of about half Presiding Off icer of the Houston Pilots Capt. 11:35 A.M. ALL ABOARD a dozen pilots are out on the ship channel Mike Morris and Capt. Holly Cooper, one Cooper, maneuvering, on average, 60 vessels. All of of only four female pilots, talk shop about along with the pilots have captain’s licenses and have the Houston Ship Channel and their jobs a pilot boat worked for years before joining the Houston as local navigators. The margin of error for driver and a Pilots, which requires an additional three- a pilot navigating the channel is just one deck hand, year, intensive deputy training program. All millimeter. are ready vessels in the channel are required to be to set sail turned over to a certified pilot to navigate 9:55 A.M. ALWAYS ON CALL to retrieve because of their local knowledge and two of her peers who are out on the water Cooper and company make it back to the The pilot dispatch center is at work experience. guiding an oil tanker. dock after a full day on the turbulent waves. 24/7/365 to maintain the flow of goods. This year, the Houston Pilots is OCTOBER 31-NOVEMBER 6, 2014 HOUSTON BUSINESS JOURNAL 11C SPECIAL REPORT

“DREDGING” pated capital investments by the operators through the Port Terminal Rail Association CONTINUED FROM PAGE 9C include building a second track on both sides of the ship channel — allowing for two ble by rail, truck and pipe. Shale oil has signif- $52.1 billion trains to come and go simultaneously — and icantly brought down the energy costs of U.S. Tax revenue generated by the for double tracks along Highway 225 from manufacturing and bolstered petrochemical Houston Ship Channel Barbours Cut to Beltway 8 near Pasadena. companies on the ship channel, which use Expansion of the rail lines isn’t just lim- crude, natural gas and coal to create plas- ited to the ship channel. Over the next few tic and other chemicals. Much of the plastic $178.5 billion years, the Gulf Coast Rail District estimates is stored as pellets and shipped to product Statewide economic impact of the about $123 million for two rail expansion manufacturers. Petrochemical companies ship channel and improvement projects will be under- also create fi bers, surface coatings, resins, way in the city, Executive Director Maureen aromatics and a slew of other products that COURTESY Crocker said. are used in almost every sector of the econ- Houston via the Panama Canal. Th e service, boom in Central and West Texas. So rail has “We are a destination for the rail lines. It’s omy, including construction, retail, medical called Th e Gulf of Mexico Express launched been a critical infrastructure to transport because of the port and the petrochemical and agriculture. Th ese products are shipped by Shanghai-based COSCO Container Lines crude to refi neries on the Gulf Coast. Char- industry; those were the reasons that they and sold all over the world, many times in America Inc., is the fi rst direct container lie Jenkins, managing director of channel came here,” Crocker said. “Now, they’ve shipping containers. Increased petrochemi- line from China to call the Port of Houston development and environmental aff airs, sits stayed, and a lot of companies come here cal activity on the coast has created a need for in nearly ten years. Th e port will be the only on the board of the Port Terminal Rail Asso- and try to locate in areas around property facilities and waterways that can handle the U.S. port of call on the Gulf of Mexico Express ciation and has seen a shift in rail logistics in that is rail-serviced.” output from petrochemical manufacturing. service. Nearly one-quarter of all container- the past few years. POHA projected a total of $35 billion in Traditionally, the U.S.’s relationship with ized cargo at the port has been imported from “Th ere has been an enormous shift in rail capital and maintenance investments from the Panama Canal has been one of expor- China. traffi c and logistics. Now, all of a sudden, we both the public and private sectors along the tation, with total U.S. exports to Panama in Expansion of docks and container yards have crude oil coming by train. We didn’t channel between 2012 and 2015. 2012 at $9.9 billion, according to the U.S. and larger cranes are expected to be complete have any crude oil a couple years ago. Recent “Th e Houston Ship Channel is what has Department of Commerce. But at the Port by early next year to handle increased capac- years, we’ve had a bunch of coal. Go back 10, caused Houston to become the fourth largest of Houston, expected increases in imports ity. Th e Bayport container terminal is only 50 we didn’t have any,” Jenkins said. “So how city in the nation, to be the primary export- via the Panama Canal is spurring activity at percent built out, and the facility is expected the cargo is moving has changed dramatical- ing metropolitan region in the nation,” both Bayport and Barbours Cut. Th e Port of to be completed in 2020. ly where it had stayed stable for a long time. Longoria said. “I think it’s really important Houston Authority, the governmental entity And the rail companies are businesses, and to pause and consider how important this which owns and operates the public facilities NEW INFRASTRUCTURE NEEDED they’re investing in their assert for produc- asset is and that we continue to work in along the ship channel, is ramping up trade Railroads are expanding to meet tive business.” partnership to assure that the second cen- with China in the container industry with a increased demand. Pipelines haven’t gone Union Pacifi c and BNSF Railway are the tury of the Port of Houston is as remarkable new all-water service connecting Asia and down fast enough to keep up with the shale two main rail operators at the port. Antici- as what we have seen in the fi rst.”

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