August 2014 Port Bureau News

Port Bureau August 2014

Greater Houston Port Bureau Spotlight: David Grzebinski CEO & President, Kirby Corporation

Gulf Coast Investment

Flood of Ethane Leads to New Chemical Investment on the Gulf Coast

Brownwater and Bluewater Interface

Commerce Club with Chairman Longoria

Stakeholders Working to Improve Safety and Efficiency

Port Commission Committed to Facilities Investment, Capturing New Economic Opportunities

News Bridging the Skills Gap Education, Industry Join Forces to Fill Skills Gap

Port Freeport Receives New Cranes TCEQ Announces Drayage Truck Incentive Program

www.txgulf.org

Port Bureau 8

3 Captain’s Corner Anniversaries

6 Port Watch

The Trade Tide Ends Its Seasonal Ebb

8 Gulf Coast Investment

Flood of Ethane Leads to New Chemical Investment on the Gulf Coast Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Christine Schlenker Copy Editors Emily Mitchell Judith Schultz Art Director Christine Schlenker For information about the Port Bureau:

Phone: (713) 678-4300 Email: info@txgulf.org

News

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30

14 Commerce Club

25 Spotlight

16 TCEQ Announces Drayage Truck Incentive Program

28 Bridging the Skills

18 85th Annual Dinner

Receives New Cranes

Janiece Longoria, Chairman, Port Commission

20 Brownwater and

Bluewater Interface

Writers Dave Cooley Matt Logan Emily Mitchell Christine Schlenker Judith Schultz Patrick Seeba Front Cover Photo courtesy of Lou Vest

Photographers Christine Schlenker Patrick Seeba For information about the Port Bureau News stories or advertising:

Port Bureau Staff Jeannie Angeli Al Cusick Megan Essenmacher Cristina Gomez Janette Molina

Printing Company DiPuma Printing and Promotional Products www.dipuma.com

Email: editor@txgulf.org

2 | August 2014 www.txgulf.org

David Grzebinski, CEO & President, Kirby Corporation

Gap

30 Port Freeport

35 Port Bureau Member Update

A Publication of the Greater Houston Port Bureau The Port Bureau News magazine is a monthly publication of the Greater Houston Port Bureau, a member-driven nonprofit dedicated to promoting the maritime community, providing vessel movement information and offering members premier networking and advertising opportunities to drive business.

The magazine is distributed to over 6,500 professionals in the Houston maritime community via U.S. mail and email. Advertising is available for members.

Captain's Corner 60 -85 -100 : Anniversaries Celebrate th

th

th

Who We Are; Where We’re Going

R

ecently, my family traveled to western New York for my parents’ 60th wedding anniversary.

Coming from a big family, it was fun to gather with my sisters and brothers and most of my nieces and nephews to recognize and honor my parents’ marriage.

I could have done without some of the stories told to my children about young Billy and his not-well-thought-out escapades, but what are uncles for if they cannot tear down the parental facades shielding our offspring? But telling stories and recalling the past is an important part of understanding who we are, and I loved it. It was also pure pleasure to do something special for my parents in marking a day that collectively celebrated our good fortune.

At home at the Port Bureau, we are speedily getting underway to honor Ned Holmes at our 85th Annual Maritime Dinner. It will be another time of remembering accomplishments, celebrating our success as a port community, and thanking those who have contributed so much to our progress.

The biggest anniversary celebration on the horizon is the Houston Ship Channel Centennial. One hundred years ago, Woodrow Wilson pushed a button in the Oval Office to fire a canon on the Houston Ship Channel to officially open the ship channel on November 10,

The Big Diehl Family.

1914. The Ship Channel welcomed 160 vessel arrivals and 1.2 million tons of cargo that first year. Since then, our channel has grown into a powerhouse port that drives the CAPT Bill Diehl, State of Texas and provides critical USCG (Ret.) value to our national economy with 8,000+ vessel arrivals and 237 million tons of cargo annually.

For the past year, I’ve been part of a committee working to recognize the channel’s 100 years of activity with a series of celebrations and commemorations, and I would like to share with you some of the things we’ve planned to applaud ten decades of achievement: • August. The release of a centennial commemorative book chronicling the obstacles faced and the brilliant solutions implemented that transformed Buffalo Bayou into a 52-mile deep-water channel.

• September. The release of a port curriculum developed by the Houston World Affairs Council to bring the message of the Port to the next generation. It will teach students about ports, global markets, supply chains, and the history of the Houston Ship Channel.

• September. The exhibition “Stories of a Workforce: Celebrating the Centennial of the Houston Ship Channel” opens in the historic Julia Ideson (Houston Public Library) Building in downtown Houston, from September 2, 2014, to January 31, 2015. The folks at the Houston Arts Alliance did a wonderful job documenting the voices of those who have made their living along the ship channel.

• September. To honor Greater Houston Port Bureau | 3

the East Side and surrounding Ship Channel communities, a regional outdoor family festival will take place at the Bayport Cruise Terminal on Saturday, September 6, from 2 to 6 p.m. Geared toward area families and open to the public, this hands-on celebration will feature interactive elements, art, and entertainment provided by local schools and community organizations.

Educational activities and attractions range from tours of the M/V Sam Houston, a tug boat tug-ofwar, an interactive antique fire truck, toy sailboat games, face painting, treasure hunts, a variety of food, and much more. The daily traffic of the ship channel will serve as the festival’s lively backdrop.

RSVP at www.promotehoustonshipchannel2014. org/events.

• October/November. A 60-minute documentary about the history of the Houston Ship Channel

will air on PBS, regionally this fall and later on nationally. Made with the help of the Texas Foundation for the Arts, the documentary will also include an overview of ship channel operations and its importance.

• November. On November 10, 2014, we are planning a waterside rededication ceremony commemorating the 100th anniversary.

Where are we going next? I hope we are ALL getting on board with the celebrations! Put them on your calendar. Tell your neighbors. Send a note to your children’s teachers. Let’s all celebrate our collective good fortune together and use this opportunity to think about and set the course for another 100 years of Houston Ship Channel progress and prosperity. ò

4 | August 2014 www.txgulf.org

In 2014, the

HOUSTON SHIP CHANNEL will celebrate 100 years as a continual driving force behind Houston’s

robust economy. As one of Houston’s greatest historical achievements, the Ship Channel is a key asset for ensuring the region’s future growth and prosperity, and truly something to celebrate. THROUGHOUT

THE CENTENNIAL YEAR,

A SERIES OF DYNAMIC SIGNATURE EVENTS will electrify the imagination of residents across the Bayou City and the region, along with

IMPLEMENTING A SUBSTANTIAL MARKETING CAMPAIGN.

Promote Houston Ship Channel 2014, Inc. invites you to the Centennial Family Festival, an outdoor fair and maritime exhibition, featuring interactive elements, arts and entertainment.

Saturday, September 6, 2014 Bayport Cruise Terminal 4700 Cruise Road, Pasadena, Texas 2:00 p.m. – 6:00 p.m.

The festival is FREE, but all attendees must register prior to the event. To register and get more information on the event, please visit: http://promotehoustonshipchannel2014.org/events/geton-board About the Houston Ship Channel: The Houston Ship Channel opened to the world in 1914, and quickly become the region’s largest economic engine. One hundred years later, the Houston Ship Channel supports activities at the Port of Houston that are responsible for over 1 million jobs and $178 billion in statewide economic impact.

If you have any questions, please call the Community Information Line at 713-670-1000.

Greater Houston Port Bureau | 5

© Christine Schlenker

PORT WATCH

The Trade Tide Ends Its Seasonal Ebb Tom Marian, Buffalo Marine Service The half-year trade cycle has done what it typically does when the heavy air of summer settles over the Texas coast – it finishes on an ebb. Thus, the lassitude of summer descended upon the June arrival numbers with a rather heavy hand. All told, the cumulative count for Texas ports fell by more than 6%. Thankfully, the year-to-date tallies remain nearly 4% above 2013’s pace which bodes well for the second half of 2014.

Only two ports managed to post positive month over month arrival numbers: Brownsville and Corpus Christi. That should not be a surprise with respect to Brownsville given that May was its worst month of 2014 and the port nearest the border continues to benefit from the fracking bounty. Of note is

the fact that Brownsville remains 14.6% below 2013’s arrival totals while Corpus Christi is outpacing last year’s vessel activity by over 17%. Undoubtedly, Corpus Christi was aided by back-to-back monthly highs with June registering a 3% gain over May. Corpus Christi’s waterfront rail activity has been rather impressive this year as the shale gas harvest works its way northwest along the Eagle Ford play – a mere 70 miles from the port.

Texas Ports Deepdraft Vessel Arrivals June 2014 Year-to-Date Percent Change BROWNSVILLE, -14.6%

CORPUS CHRISTI, 17.2% FREEPORT, 25.9%

GALVESTON, 21.6% HOUSTON, -0.6%

PORT LAVACA, 8.3% SABINE, 3.6%

TEXAS CITY, -7.1% GRAND TOTAL, 3.8%

6 | August 2014 www.txgulf.org

So endeth the good news for the month given that every other Texas port, along with the regional inland tow movements saw fewer arrival numbers. Yet, nearly all of these same ports continued to improve upon 2013’s solid totals.

Freeport remained the top port in terms of year-to-date performance on a percentage-

port watch

Port of Houston Deepdraft Vessel Arrivals 1,500

June 2014 vs. June 2013

1,000

June 2014 YTD (Total: 4,056) 500

June 2013 YTD (Total: 4,080)

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wise basis with a 26% annualized improvement. This was marginally impacted by Freeport’s 2.6% month-tomonth vessel arrival wane. Galveston is similarly situated as Freeport with respect to its year-to-date arrival statistics with a 22% upward trend; however, its monthly numbers declined by 8%, primarily attributable to the tapering of the cruise ship season.

Sabine also saw an 8% dip in monthly vessel activity. Yet, in spite of handling its fewest number of ships for the year, Sabine still finds itself in a better position than 2013 - to the tune of 3.6%.

indicating that the current balance between high sulphur imported crudes and distillates is holding steady. LPG also fell on the loss side of the ledger by 17% but is still slightly above 2013’s data. The three C’s – cars, containers and chemicals – ran the gamut with a no-change, an 8% drop, and a 20% plunge respectively from May to June. Bulk carrier’s multi-month run of gains came to a screeching halt with 13% fewer ships. Finally, offshore tows held their own with a slight monthly increase but are far behind last year’s pace.

So how trendeth July? It appears that the mid-summer turn of the trade is unfolding and the second half of the year should maintain the pace of the first half. ò

The Port of Texas City was the only port this month to remain “in the red” for both the year and the month. Granted, its monthly arrival drop of 6% was attributable to a substantial decrease of activity at one terminal. Nonetheless, the systematic shift of this rail port from importing crude to handling domestic shale crudes via rail and handling distillates as an export has radically changed its petroleum trade picture.

Houston, of course, followed the crowd or perhaps the gang trudged behind Houston. No matter, given that 9% fewer deepdraft vessels plied the ship channel. Most of the vessel categories recorded significant losses, albeit general cargo movements did stand out as a bright spot with a 1% positive bump demonstrating that demand for exploration-related imports remained strong. Tank vessels were off by 7% but are still more than 5% over 2013’s totals,

Greater Houston Port Bureau | 7

ETHANE INVESTMENT

Flood of Ethane Leads to New Chemical Investment on the Gulf Coast Emily Mitchell, GHPB

T

he surge in shale gas production in recent years has dramatically reshaped the chemical industry in the United States and around the world. Due to the shale gas boom, some estimate that natural gas now constitutes approximately 80% of the chemical industry’s raw material, up from 50% only a few years ago.

Thanks to the substantial drop in natural gas prices and the large quantities of ethane being produced through fracking, the U.S. is now one of the cheapest places in the world to make plastic. Experts say this new landscape has the potential to revitalize the U.S. chemical industry, and billions of dollars of new investment is finding its way to the Gulf Coast.

Along with significant quantities of other hydrocarbons such as butane and propane, the fracking process has led to an overabundance of ethane, which is valued by the chemical industry as raw material for plastics production. The ethane is sent through a cracker, which uses steam and extremely high temperatures to “crack” its molecular bonds to produce ethylene, the most commonly produced petrochemical and used as the basis for a wide variety of plastic products such as food wrapping, PVC, and adhesives. However, so much ethane is being produced that domestic markets simply cannot absorb it all. According to one industry group, as much as 87% of the ethane produced from the Marcellus shale play as of January 2014 was rejected and forced to remain in the pipeline instead of being extracted for use as feedstock. Analysts and industry observers fear that we are fast approaching the pipelines’ capacity to accept the rejected ethane.

This has prompted the industry to look elsewhere to send the quantities of plastics materials that cannot be consumed domestically. Specifically, companies are

eyeing the large urbanizing populations in China, Asia, and Latin America. Phillips 66 President Tim Taylor said in an interview with the Houston Chronicle in June that he expects North American demand for natural gas to remain flat, but sees Asia and Latin America as prime targets for products made from natural gas liquids.

In response, the chemical industry has announced more than $100 billion in new projects and investments in the U.S. as of February 2014, according to a report released by the American Chemistry Council (ACC).

The ACC estimates that higher industry output could lead to as many as 55,000 new permanent jobs in the chemical industry if all of the planned projects are completed, along with more than 300,000 indirect and 265,000 induced jobs. The majority of these new investments focus on expanding capacity for the production of ethylene, ethylene derivatives, ammonia, methanol, propylene, and chlorine, and more than half come from non-U.S. companies.

The Gulf Coast in general, and the Houston Ship Channel in particular, where a number of companies plan to construct new or expanded ethane crackers and at least one firm intends to build an ethane export facility – stand to benefit from this new round of chemical investments.

Cracker Construction Boom

With the collapse in U.S. gas prices and the overabundance of ethane, chemical companies have rushed to take advantage of this new opportunity. Ethane crackers have been running at 95% capacity and five new crackers have been announced in Texas alone, along with several more expansions of existing facilities.

8 | August 2014 www.txgulf.org

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ETHANE INVESTMENT ICIS estimates that new and expanded ethane crackers in Texas, Louisiana, Pennsylvania, West Virginia, and Kentucky will lead to a 38% increase in ethylene production capacity over the next few years.

Among the companies building new ethane crackers along the Gulf Coast are Chevron Phillips Chemical, ExxonMobil Chemical, and Dow Chemical. Chevron Phillips is in the midst of its $6 billion Gulf Coast Petrochemicals Project, kicking off the first phase with the April 2 groundbreaking for its new ethane cracker in Baytown. The cracker is massive: taking up the space of 50 football fields, it also involves 350 miles of piping, 1,600 miles of cable, and 140,000 tons of concrete, according to CEO Pete Cella. The company also broke ground in June on two polyethylene units in Old Ocean, which will have the capacity to make 500,000 tons of plastic resin annually. The new facilities in Baytown and Old Ocean are expected to come online in 2017, and Cella expects that most of the ethylene produced by the cracker will be used domestically, including by Chevron Phillips itself.

ExxonMobil recently awarded contracts and began construction on a 1.5 million ton steam cracker at its existing facilities in Baytown, as well as two

polyethylene processing units at ExxonMobil’s Mont Belvieu plastics plant which will have the capacity to produce 650,000 tons annually. According to the company, the new facilities are expected to start up in 2017, and the project will employ up to 10,000 construction workers, add 350 permanent jobs at the Baytown facility, and indirectly create 4,000 jobs in the Houston area.

Finally, Dow Chemical announced that it would start construction on a world-scale ethane cracker in Freeport on June 30, 2014, as part of the company’s approximately $4 billion in Gulf Coast investments. The facility, which will have a capacity of 1.5 million tons per year, is expected to start up in 2017 as well and will employ 2,000 people during construction.

These three new ethane crackers currently under construction are only part of the picture. Several other companies have announced plans to build new crackers or expand capacity at existing facilities over the next few years, with most planning to come online by 2017.

Because it has been more than a decade since a company has built a new ethane cracker, and with so many being constructed at the same time, industry observers doubt that all announced projects will be completed. Companies will have difficulty finding enough

Gulf Coast Crackers (Announced)

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# Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

LyondellBasell Occidental Chemical with Mexichem Formosa Plastics Chevron Phillips Chemical Dow Chemical INEOS LyondellBasell LyondellBasell ExxonMobil Chemical Chevron Phillips Chemical BASF TOTAL Petrochemicals LLC Huntsman Westlake Chemical Sasol Formosa Plastics Axiall with Lotte Shin-Etsu Williams with partner(s) Williams

10 | August 2014 www.txgulf.org

15 16 17 18, 19 C2 Capacity Start-up (tons) Date

363,000 544,000 1.0m 91,000 1.5m 115,000 113,000 363,000 1.5m 1.5m NA 19,300 113,000 1.5m 1.2m World-scale 500,000 1.5m 273,000

Late 2015 2017 Q1 2017 2014 2017 2014 2015 mid-2014 2017 2017 2014 NA 2014 2017 NA 2018 NA NA Apr. 2014

ETHANE INVESTMENT skilled laborers to do the work, and cost overruns and construction delays are likely. A typical “world-scale” ethane cracker costs around $5 billion to build, with some companies having to double their original project cost estimates, according to Dennis Cassidy, managing director at AlixPartners. Time will tell just how many of these projects are completed and when.

Betting on Ethane Exports

Other companies have taken an entirely different route and are betting on exports instead of building new capacity to consume U.S. ethane domestically.

Some observers believe that the increased demand from expanded capacity will not be able to keep up with the industry’s ability to produce ethane, leading producers and shippers to ramp up efforts to export ethane to Europe. Given that approximately 80-90% of a producer’s variable costs come from acquisition of raw materials, the low price of U.S. ethane versus naphtha (the feedstock for a vast majority of European crackers) has led companies like INEOS, SXL, Range Resources,

and CONSOL to seriously consider committing capital towards expanding U.S. ethane exports to Europe. As of April 2014, INEOS had agreements in place to bring ethane from Marcus Hook to facilities the company is building in Norway and Scotland.

In Texas, Enterprise Products Partners announced in April that it plans to build a fully refrigerated ethane export facility, subsequently confirming that the company signed a 30-year agreement with the Port of Houston Authority to use facilities adjacent to Enterprise’s Morgan’s Point terminal on the Houston Ship Channel. The export facility is designed to have an aggregate loading rate of up to 240,000 barrels per day and the company says it already has long-term contracts in place to support the development of the facility, as well as “strong interest from the international community.”

CEO Michael Creel expects more customer contracts to cover the facility’s remaining capacity, with most of the ethane initially going to Europe. The widening of

Greater Houston Port Bureau | 11

ETHANE INVESTMENT the Panama Canal may also open up the possibility of exports to Asia in the future.

In addition, the export facility will be integrated with Enterprise’s Mont Belvieu complex, which is connected to vast supplies of ethane from the Marcellus and Utica shale plays through the company’s Appalachia-to-Texas (ATEX) pipeline.

There are several potential roadblocks on the path towards exporting large quantities of U.S. ethane, mostly stemming from the fact that ethane is a very difficult material to handle.

With a boiling point of -128 degrees Fahrenheit, it must be kept at either extremely low temperatures or extremely high pressure in order to remain liquid.

While Enterprise is getting a jump on building the necessary dock and loading facilities at Morgan’s Point, exporting ethane also requires specialized ships to move it overseas as well as proper unloading and storage facilities at the receiving end. Another possible obstacle is that most ethylene crackers in Europe currently use naphtha as feedstock, requiring costly modifications to make the switch to ethane.

Despite these hurdles, as well as doubts as to whether exporting U.S. ethane will be economically feasible after costs for import and export facilities are factored in, Enterprise believes that its new export facility is a smart move

12 | August 2014 www.txgulf.org

ETHANE INVESTMENT even if domestic demand for ethane increases as expected when the new crackers start up in 2017. As reported

by RBN Energy, Enterprise estimates that around a dozen European crackers could be candidates for a switch to ethane, and the conversion of only a quarter of European cracker capacity would absorb 300 million barrels per day of surplus U.S. ethane.

Conclusion

The chemical industry is historically cyclical, with periods of high investment and new capacity followed by a slowdown. Thanks to fracking technology, a surge in ethane production, and expanding opportunities in overseas markets, we are now firmly in a boom cycle. Over $100 billion in new investment is planned over the next few years, with a large portion directed towards the U.S. Gulf Coast in the form of new or expanded ethane crackers and ethane export facilities.

This new round of projects is expected to bring jobs and economic growth to the region, but it also comes with several challenges.

Companies such as Chevron Phillips, ExxonMobil Chemical, and Dow Chemical are grappling to find qualified labor in order to complete their new ethane crackers before the competition, while firms like Enterprise will have to see if their bet on ethane exports pays off once all the expected cracker capacity comes online in 2017. Additionally, the question remains whether U.S. ethane production can keep up its current pace— fracking is a relatively recent technological development and large swaths of the U.S. shale plays have not been fully explored or their production capacity determined.

A serious decline in U.S. ethane supply is a risk facing all of these companies, whether they plan to use the ethane as feedstock for domestic crackers or export it to customers overseas. Only time will tell how the situation plays out, and the chemical industry will have to wait and see which companies finish first in the ethane race. ò

BARGING AHEAD ever so politely.

B

Buffalo Marine Service, Inc.

www.BuffaloMarine.com Greater Houston Port Bureau | 13

COMMERCE CLUB

July 2014 Commerce Club Janiece Longoria, Chairman Port Commission Judith Schultz, GHPB

Port Commission Committed to Facilities Investment, Capturing New Economic Opportunities

P

ort Commission Chairman Janiece Longoria addressed a room-capacity crowd at the Port Bureau’s Commerce Club luncheon on July 10 at Brady’s Landing, stressing the Port Commission’s commitment to invest in the Port’s facilities and to remain “vigilant in capturing economic opportunities.”

Longoria named three areas currently offering new potential to Port business: the Houston metropolitan population growth, the plastic resins industry, and the Panama Canal expansion. As plastic resins are a product in a multitude of consumer goods, the Port of Houston is in a unique position to benefit from the cycle of ethane production/export and plastic resins manufacture/import.

“Plastic resins,” stated Longoria, “account for onethird of current container exports.” Developments, such as Enterprise’s 30-year agreement with the Port of Houston Authority for land to build the world’s largest refrigerated ethane export plant on the Houston Ship Channel, could double the container export business as ethane is an essential component in manufacturing plastic resins.

As plastic resin consumer-use goods are imported back to the United States, 25% of which pass through the Panama Canal, the Port of Houston community is uniquely positioned for positive economic impact.

“There is no doubt the Panama Canal will provide significant opportunity and we need to compete for those opportunities,” Longoria emphasized.

Investments in port facilities, dredging at Barbours Cut and Bayport, and a Section 315 Study by the Army

Corps of Engineers are among the current projects underway to keep the Port competitive.

Looking toward the future, Chairman Longoria pinpointed three specific areas the Commission is exploring: significantly boosting retail imports, growing the refrigerated container business, and the development of a natural gas refueling station. The Commission has developed initiatives to promote retail imports by participating in retail association conferences with top industry leads, working with commercial real estate brokers, reaching out to Fortune 500 companies, and interfacing with key economic development organizations.

The growth of the refrigerated container business has been hampered by a lack of cold storage and warehouses. The development of more cold storage on 50 acres across from Bayport terminal on Port Road is on the table. “This is a win/win for everyone,” stated Longoria.

Examining how the infrastructure might be built in Houston to accommodate a move to natural gas in the transportation industry is a forward-looking goal for the Commission. Utilization of natural gas is a path toward balancing “business goals with the environment,” and there may be some federal funding for the conversion if infrastructure can be developed to make it feasible.

“We hope it reflects our very deep commitment to the Port of Houston … and to continue this legacy,” concluded Longoria. ò

14 | August 2014 www.txgulf.org

commerce club

Left: Capt. Kristi Taylor, Houston Pilots, talks with Ralph D’Onofrio, D’Onofrio Works Management.

Center: Jürgen Schröder, Schröder Marine, and Dennis Hansell, Suderman & Young Towing and GHPB Chairman of the Board of Directors.

Right: Chairman Longoria addresses over 200 attendees.

Commerce Club Sponsors:

Premier Table Sponsor:

Greater Houston Port Bureau | 15

DRAYAGE INCENTIVE PLAN

TCEQ Announces Drayage Truck Incentive Program Texas Emissions Reduction Plan

T

he Texas Commission on Environmental Quality has announced $3.1 million in grant funding will soon be available for the Drayage Truck Incentive Program. The DTIP will provide incentives for the replacement of older drayage trucks operating at public seaports and Class I rail yards in the state’s following air quality nonattainment areas: Houston-Galveston-Brazoria, Dallas– Fort Worth, and El Paso.

A primary purpose of the DTIP— as a program under the Texas Emission Reduction Plan, or TERP—is to reduce emissions of nitrogen oxides (NOx) and other pollutants, including particulate matter, at these facilities and in the nonattainment areas in general. Simply put—to keep the air clean.

A drayage truck eligible for replacement must have an engine model year of 2006 or earlier and must be:

• a heavy-duty on-road drayage truck with a gross vehicle weight rating over 26,000 pounds • a non-road yard truck with an engine rated at more than 125 horsepower

An applicant must have continuously owned or leased the drayage truck for at least two years before applying and must have operated it at one or more eligible seaports or Class I rail yards over that period for at least an average of 200 visits per year. Each combined entry and exit to and from the seaport or rail yard counts as a visit. For drayage trucks operating permanently at a seaport or rail yard, each day of operation at the facility is a visit.

A drayage truck eligible for purchase must have an engine model year of 2010 or later, and must be:

• a heavy-duty on-road yard truck with a GVWR over 26,000 pounds with a day cab only

• a non-road yard truck with an engine rated at more than 125 horsepower.

The grants will reimburse up to 80 percent of the eligible cost (the price less the value of the vehicle being replaced and net of any other grants applied) of the new drayage truck. Grants will be awarded first come, first served. However, for the first 90 days of the grant round, the TCEQ will give preference to applicants replacing drayage trucks with yard trucks. Thereafter, all other eligible drayage trucks will be considered for grant funding.

Those interested should attend a grant workshop on Wednesday, September 10, 2014, at 1:00 p.m. A workshop in Spanish will take place at 4:00 p.m. Workshops will be held at the North Channel Branch Library, 15741 Wallisville Road, Houston, TX 77049.

For more information, call 800-919-TERP (8377) or e-mail terp@tceq.texas.gov. ò

Port Bureau analysts are available for grant writing, research, and reports.

Please email info@txgulf.org for more information about Port Bureau services.

16 | August 2014 www.txgulf.org

Greater Houston Port Bureau | 17

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I��������������� Greater Houston Port Bureau | 19 V���� M��� L���� T��������

Brown/Bluewater interface

Brownwater and Bluewater Interface on the Houston Ship Channel Matt Logan, GHPB

E

Safety is the number one concern of the operators along the Houston Ship Channel. How the water-borne traffic performs together goes a long way to ensuring the safety and the open flow of the channel. The large ships, known as bluewater ships, are better recognized. Sometimes overlooked, but equally important to the Houston Ship Channel economic structure, are the inland tows, or brownwater fleet. How the brownwater and bluewater vessels labor and interact is vital to keeping the Houston Ship Channel incidentfree. However, the vessel operators face numerous challenges with each trip.

Uniqueness

The Houston Ship Channel is like no other waterway in the United States. As Captain Les Cain of Buffalo Marine Service describes it, “You can go for hours at places on the intercoastal (waterway) and never see another boat, but normally in Houston you don’t go a single second without seeing another boat.” The vast number of ships along the Houston Ship Channel at any given time can be overwhelming for a ship or barge operator, especially for one who is navigating through Houston for the first time.

Another aspect which makes the Houston Ship Channel unique is its shoaling. Due to the muddy

© Capt. Lou Vest

very day, there are over 350 tow movements on the Houston Ship Channel. Combine this with the 65-70 ship movements per day and you get quite a congested waterway. Without question, Houston is one of the busiest and most difficult waterways to navigate in the United States.

banks and numerous rivers and streams that end in the Houston Ship Channel, the silt buildup in the channel occurs much more frequently than most other places in the U.S. The channel is designed to be wide as well as deep. The silt buildup along the sides of the channel can be even more detrimental than the buildup in the middle, restricting the heavy traffic along the ship channel to operate along a more confined waterway.

Consider what happens when a stalled vehicle clogs up an outer lane of the highway on your way to work; that scenario is the status-quo for vessel operators in the Houston Ship Channel every day.

Changing Technology

In the past twenty years, technological advances have allowed vessels to be built for more efficiency and to carry more. The result is a boom in the number of vessels under construction as well as the number of vessels being retired. For example, 75% of the barge fleet in operation today was built in 1995 or later. With the new vessels comes a whole new training program, and in some, a new mentality for their operators.

20 | August 2014 www.txgulf.org

Brown/Bluewater interface

% of Current U.S. Barge Fleet by Year Built 8% 7% 6% 5% 4% 3% 2% 1% 0%

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Greater Houston Port Bureau | 21

Brown/Bluewater interface For a long time, the common practice was for barges to run at a constant speed, slower than that of the larger ships, allowing for the larger ship to pass the barge. The newer barges come with more horsepower and travel at speeds and in places along the ship channel in which barges were previously unable to operate.

The newer ships and barges also create a demand to maximize efficiency. This brings more passing and a greater opportunity for an accident.

Communication

Most vessel operators will tell you that communication is the key to a safe waterway. Multiple means of communication are available to ship and pushboat operators; the only issue is whether or not these means are regularly used. The oldest, and most reliable, means of communication available to the mariner is the radio (i.e., VHF-FM). When vessel operators correctly use their radio, nearly all accidents can be avoided.

A more advanced mean of communication for waterborne vessels is the Automatic Identification System, or AIS. The AIS system is installed on most ships and barges traversing the Houston Ship Channel, and is required by law on vessels with gross tonnage of 300 or more, tows over 26 feet and 600 horsepower, as well as all passenger ships. AIS maps a vessel’s location and path electronically using GPS software. A recent AIS add-on named the Rosepoint Program actually charts a vessel’s projected path given its current course, and will warn operators of a potential accident.

Successful use of trusted and reliable new communication will always be the biggest combatant against potential maritime accidents.

A Good Track Record Only Getting Better

The Houston Ship Channel has an extremely good safety record, especially considering the amount of traffic it sees. This is a testament to how the vessel operators handle the many challenges they face every trip.

Sea & Shore

Ship & Store

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The Odfjell Group is a leading participant in the global market of seaborne transportation and storage of chemicals and other specialty bulk liquids. The Odfjell Tankers fleet of about 90 ships, trades globally and regionally. The Odfjell tank terminal division of 12 partially owned tank terminals is in a network with 12 other tank terminals partly owned by related parties. The terminals are all strategically located around the world, and with Odfjell Group headquarters in Bergen, Norway, the Company has more than 20 offices world wide.Odfjell has about 3,500 employees and annual gross revenue of about $1.2 billion.

22 | August 2014 www.txgulf.org

Texas Gulf Coast Gateway to the Midwest, Southwest and the Greater Galveston/Houston Region

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Greater Houston Port Bureau | 23

Brown/Bluewater interface Just as the Houston Ship Channel is different from any waterway on earth, the Houston maritime community is unique as well. Nowhere else in the world does the maritime community rally together for the common good like in Houston.

On July 7, thirty stakeholders representing both blue and brownwater vessels met at Buffalo Marine to discuss how to improve the interaction between the two groups of operators and ensure a safe waterway. The group discussed many future possibilities. Their aim is to come up with practices that will aid blue and brownwater vessel operators and not just bog them down with more regulations.

Safety will forever be the number one priority on the Houston Ship Channel. As long as there is a vessel in the water, there will be the possibility of an accident.

A mariner’s common sense and good communication are the best preventatives for accidents. Both of these qualities have led the way for 100 years and will ensure

Blue and Brownwater stakeholders meet at a joint conference at Buffalo Marine on July 7, 2014. smooth sailing for the next generation of navigators on the Houston Ship Channel. ò

Ed. Note: Email info@txgulf.org to sign up for future meeting notices.

24 | August 2014 www.txgulf.org

Spotlight

From Engineer to

Executive

Spotlight on David Grzebinski, CFA CEO & President, Kirby Corporation Christine Schlenker, GHPB Despite his extensive experience in chemical manufacturing and business, David Grzebinski freely admits he still has plenty to learn from the people he works with, especially his predecessor at Kirby, Joe Pyne. Intrigued by the science of chemistry joined with “the logic of engineering,” David started his education David Grzebinski at University of South Florida studying chemical engineering, and participation in co-ops at Farmland Industries’ fertilizer plant and the USF physical plant reinforced his aptitude and desire to become an engineer. At the USF physical plant, David “got into writing computer controls and computer programs to control the equipment, and then also to monitor their performance…As an engineering student, it didn’t get much better than that.”

level of responsibility they gave me as a young person helped me grow tremendously.” His experience in a manufacturing environment helped him gain a further appreciation for the men and women doing the handson work at a plant. As engineers, “we were most effective when we listened to the operators and the shift supervisors who were actually running the plant.”

David spent most of his fourteen years with Dow at the Plaquemine complex, although he moved to the corporate headquarters for a few years for a temporary process control assignment. Once he returned from his stint at corporate, he helped start up a new DowExxonMobil joint venture facility making thermoplastic elastomers. During that time, David explained that he became “interested in the business side of what was going on in the chemical world.” He pursued an MBA at Tulane while working full-time and he continued to move up the manufacturing managerial chain,

After graduation, David signed on with Dow Chemical in Plaquemine, Louisiana, part of one of the largest petrochemical complexes in Louisiana. Getting his “dream job” right out of college, David started as a process control engineer writing computer programs to optimize the operation of a chemical facility. David found that the company and his colleagues provided an excellent learning environment for a young engineer, adding that “the

Greater Houston Port Bureau | 25

spotlight including managing one “The ability to really understand what’s with guys who are really of the chemical plants hard-working, but regoing on in your business…comes from within the Plaquemine ally know what they’re complex. After completbeing able to listen to…and admire doing.” David’s views ing his MBA, he once coincide with the Kirby the people who work with you.” again moved to the perspective that the corporate headquarters mariners and mechanics -David Grzebinski in Midland, Michigan, are the face of the orgato manage the pennization as the people sion fund and work on interacting daily with international finance deals for Dow to build $600-700 customers and delivering Kirby’s customer service. million plants around the world. For David, “it was Although David’s executive schedule prevents him great exposure to segue the manufacturing knowledge from visiting the towing and engine operations as much that I had into some business opportunities.” as he would like, he still makes a point to visit the main David followed up his Dow career with a series of executive-level positions at FMC and FMC Technologies before joining Kirby in 2010. Despite moving from a manufacturing environment to the maritime industry, David found that the two have something important in common: “The great thing…is that you’re dealing

Kirby facilities regularly and to take the time to listen to “the people who live it and really know what they’re doing.” As he learned from his manufacturing experience, “the ability to really understand what’s going on in your business…comes from being able to listen to… and admire the people who work with you.” Continuing

26 | August 2014 www.txgulf.org

Spotlight a long-standing Kirby tradition, David held a lunch meeting with the lead captains from brown and blue water operations when the quarterly earnings report was released on August 1. This meeting gave the lead captains the opportunity to voice their crews’ thoughts and concerns, which over the past meetings have ranged from questions about operational improvements to employee healthcare benefits.

David was able to share with the captains that they can look forward to new opportunities, as Kirby will be increasing its capacity to service its Gulf Coast and other customers who are growing to take advantage of plentiful shale gas. Planned growth includes building over 90 inland barges, three tow boats, and four coastal articulated tug barge units (ATBs) over this year and the next two years, and increasing the number of mariners graduating from the Kirby training center in Channelview. Despite the growing size of Kirby, now at just under 5,000 employees, David is proud of the company’s “strong family feel” gained by the mariners

who live together for days or weeks at a time. The family atmosphere is ingrained throughout the shore side operations also, aided by Kirby’s core values of placing safety and customer service above cost, and commitment to “running the company into perpetuity.”

As a partner with the Maritime & Logistics Youth Expo on September 6, Kirby will display equipment at the event for young aspiring mariners. David noted that with the growth facing the Gulf Coast, now is an excellent time to consider a maritime career, and Kirby’s U.S. Coast Guard-approved courses can provided license training to entry-level deckhands through experienced wheelmen. For students considering the challenging but rewarding path of becoming a mariner, David shared the following tips: “Get on a good boat, listen to the captain, and learn all you can. It will only serve you well moving forward.” ò Ed. Note: David Grzebinski will speak at the September 11, 2014, Commerce Club luncheon. For more information, visit www.txgulf.org/commerceclub.php.

Greater Houston Port Bureau | 27

skills gap

Education, Industry Join Forces to Fill Skills Gap Emily Mitchell, GHPB

Local schools, businesses, and organizations have united in various partnerships and initiatives to meet the growing demand for skilled labor in the Houston metropolitan area. In contrast to many other regions of the country, the Houston area has seen tremendous job growth in recent years, particularly high-wage middleskills jobs that require more than a high school diploma but less than a four-year bachelor’s degree. Fields such as manufacturing, logistics, energy, chemicals, and construction are booming, with the oil and gas industry alone directly responsible for an additional 67,000 jobs since 2001, according to the U.S. Chamber of Commerce. But with high job growth in these sectors comes the potential for an acute skills shortage in the Houston area. Many companies are already having difficulty finding the skilled talent required for the billions of dollars of planned investment in the Houston and Gulf Coast regions.

Approximately 41% of all jobs in the Houston area are considered middle-skills positions, with an additional 296,000 openings of this type expected to be added between 2014 and 2017, according to data from the U.S. Bureau of Labor Statistics. Not only are these types of jobs, including mechanics, technicians, and drivers, historically difficult to fill due to a lack of technical proficiency, but the current workforce is rapidly aging without enough younger workers to step in.

According to a recent study, 45% of skilled trade workers in Houston are over the age of 45 and replacing these employees as they retire will become exceedingly difficult. The pipeline of new talent is frankly too small to keep up the pace and many students simply are not aware that these positions provide for stable, lucrative careers.

As a result, educators and industry leaders have mobilized their efforts to solve this looming crisis.

Responding to trends in the maritime industry, San Jacinto College launched a maritime training program four years ago, working with industry leaders on its development in order to properly address maritime training needs. As of mid-2014, almost 2,500 workers have gone through San Jacinto College’s maritime training.

The school has also introduced a maritime technology degree program.

On the chemicals side, nine community colleges in the greater Houston and Texas Gulf Coast area have come together to form the Community College Petrochemical Initiative (CCPI). CCPI shares course materials and training practices among the area’s community colleges to train and certify students and educators in technical fields, such as welding, machining, pipefitting, instrumentation, and more.

With substantial investments coming in the next few years, 81,000 new jobs are expected to be added to the 73,000 jobs already supPort of Houston Authority ported by the Houston: America’s Distribution Center Texas chemical www.portof houston.com/map industry. The

28 | August 2014 www.txgulf.org

skills gap CCPI initiative is backed by companies like ExxonMobil, which recently committed $1 million to the effort.

Finally, the Greater Houston Partnership recently announced the launch of UpSkill Houston, an approach specifically developed to treat the skills gap in Houston’s workforce. The program brings employers and educational institutions together, sharing data in order to ensure education and training meet employers’ hiring needs. UpSkill Houston will focus on seven key sectors in the Houston area—advanced manufacturing, construction, healthcare, oil and gas, petrochemicals, ports and maritime, and utilities—and will include a public relations campaign in order to improve awareness and perception of middle-skills careers.

the energy and petrochemical industries that drive our regional economic vitality. ò

These programs and initiatives are only examples of the efforts being made by industry and educational institutions to address the skills gap in the Houston area.

While job searchers have been flocking to the region in recent years amidst strong job growth compared to the rest of the country, Houston is experiencing an oversupply of workers in some occupations and an undersupply in others. Houston may have the second highest concentration of engineers in the country, but its biggest challenge will be finding enough talent to fill the middle-skills positions that are crucial to

Greater Houston Port Bureau | 29

port freeport cranes

New Port Freeport Cranes Lift Business Expectations

Port Freeport’s new container cranes arrived on July 19, 2014, after departing from Shanghai, China, on July 19, 2014. Photo courtesy of Port Freeport.

Judith Schultz, GHPB

P

ort Freeport announced the arrival of two postPanamax cranes on July 23, 2014. The gantry cranes departed from Shanghai, China, on May 7 and arrived at Port Freeport on July 19.

region. For these companies to be able to ship directly from the port will allow them to reduce their supply chain costs and have access to the world-wide markets,” said Executive Port Director/CEO Glenn Carlson.

“This commitment from the Commissioners demonstrates that Port Freeport will make the financial investments to support the petrochemical industry in our

“The cranes will allow us to attract new services and business to Port Freeport which will lead us in a

The two 100-foot gauge container cranes were delivered by the Zhen Hua 28, a Semi-Sub HI vessel, completely erect. Both cranes will occupy a portion of Berth 7 at Velasco Terminal. At approximately 80 feet wide each, they stand just less than 300 feet from the ground and can lift up to 75 tons.

The cranes will be taken through a detailed, four to six week commissioning process before a formal handover. The cranes represent an investment of $14 million

by Port Freeport and are expected to handle an average of 35 to 40 container lifts per hour. This doubles the current productivity of the port’s existing container crane.

30 | August 2014 www.txgulf.org

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port freeport cranes new strategic direction that we are very excited about,” said Carlson.

The addition of the cranes to Port Freeport’s inventory is a part of the port’s forward-looking plans to accommodate the expanding needs of current customers and attract new ones. A sizeable volume increase is expected from at least one of Port Freeport’s current tenants, Chiquita Brands International, Inc. Mediterranean Shipping Co. has entered into a vessel-sharing agreement with Great White Fleet, the shipping wing of Chiquita, and is scheduled to begin making calls at Port Freeport this summer.

“We would not in all likelihood have been able to retain Chiquita without those cranes, so they’re very critical for both our existing customer base and to develop a new customer base,” Port Freeport’s Chief Financial Officer Jeff Strader told the Journal of Commerce in May.

Chiquita announced merger plans earlier this year with Fyffes PLC, an Irish tropical fruit company, making it the world’s largest banana company and surpassing Dole Food Co. Chiquita, Fyffes, Dole Food Co. and Del Monte Product Inc. dominate the global banana trade, with the Wall Street Journal reporting in March that the four companies together control 70% to 80% of the market. The ripple effect of these plans can already be felt on the Gulf ports as Chiquita announced in May it would relocate from Mississippi’s Gulfport, ending their 40-year tenure, to the Port of New Orleans to “implement a new shipping configuration.” In turn, the Port of New Orleans is investing $2 million for a refrigerated container infrastructure and container freight warehouse to service the Chiquita operation.

While the new cranes keep current customers happy, Port Freeport also expects the gantries to attract new vessel calls after the Panama Canal expansion is completed. Direct calls from the more massive

32 | August 2014 www.txgulf.org

Greater Houston Port Bureau | 33

port freeport cranes vessels may not be in the charts, but they do anticipate handling more cargo transshipped via a feeder vessels system. “The big line-haul vessels will come into relay ports in the Caribbean or Mexico, and they will be transloaded into smaller feeder vessels, which are now typically the line-haul vessels to the East Coast — the 4,500 to 5,000 TEUs — and those vessels will then be destined for ports like Freeport,” Strader said in the same JOC article. “To get the real economies, they can’t do these milk runs where they stop up and down the East Coast or in the Gulf at every other port location.

They’re going to go to the larger ports, so those big [10,000- to 12,000-TEU ships] are most likely going to be on the Asia-Europe service, or they’re going to be stopping at a transload facility where they will be offloaded to anywhere from 4,500- up to 8,000-TEU vessels and then they’ll make calls into the East Coast and Gulf.”

Although there has been no announcement on the developments, JOC also reported that Port Freeport has been in negotiations with a potential customer to utilize the new container cranes and increase business in the upcoming fiscal year, beginning Oct. 1, 2014.

The arrival and commissioning of the new cranes mark yet another milestone in the success of Freeport’s 102-year-old port. Located just three miles from deep water, Port Freeport is ranked as the 24th largest port in the U.S. in terms of foreign tonnage. ò

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34 | August 2014 www.txgulf.org

PORT BUREAU MEMBER UPDATE The Port Bureau has welcomed these new members since May 2014:

Antipollution USA LLC....................... www.antipollution.gr Cheetah Chassis Corp (NA)........... www.cheetahchassis.com Enterprise Shipping.................. www.enterpriseshipping.net Lloyd Engineering, Inc............................www.lloydeng.com MacDonnell Group............................ www. macdonnell.com Mosaic.................................................. www.mosaicco.com Transaction Packing.............. www.transactionpacking.com Interested in joining over 180 Port Bureau member companies?

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Advertising Directory Bank of Texas..................................31............... www.bankoftexas.com Blades International............................ 21....................... www.bladesintl.com Blank Rome LLP.................................. 29.............................. www.brlpc.com Briggs Equipment................................ 34........... www.briggsequipment.com Buffalo Marine Service.........................13................ www.buffalomarine.com Cargoways......................................33....... www.cargowayslogistics.net Certified Port Executive.................... 9................. www.macdonnell.com Centennial Family Festival................ 5.... promotehoustonshipchannel2014.org Cheetah Chassis...............................17........... www.cheetahchassis.com Clark Freight........................................27.................... www.clarkfreight.com Gulf Winds International...................... 12................................www.gwii.com HDR Engineering Inc........................... 26........................... www.hdrinc.com Houston Pilots...................................... 7................ www.houston-pilots.com McCarthy Building Companies, Inc...... 24........................www.mccarthy.com Odfjell Holdings (US) Inc..................... 22.............................www.odfjell.com Port of Galveston.............................23.......... www.portofgalveston.com Port of Houston Authority................... 28.............................. www.poha.com Richardson Companies........................ 32.....www.richardsoncompanies.com Shrader Engineering............................ 4............................. www.shrader.net Trustmark National Bank..................... 35.......................www.trustmark.com Vopak................................................... 7..............................www.vopak.com Whitney National Bank........................11.......................... www.whitney.com Wortham Insurance............................. 25......... www.worthaminsurance.com

Greater Houston Port Bureau www.txgulf.org info@txgulf.org 111 East Loop North Houston, TX 77029 T. +713-678-4300 F. +713-678-4839

Commerce Club September 11, 2014 featuring

David Grzebinski CEO & President Kirby Corporation

Register online at: txgulf.org/commerceclub.php