June 2014 Port Bureau News

Port Bureau June 2014

Greater Houston Port Bureau Mexico - Open for (Oil & Gas) Business Energy Reform Opens Mexico to Foreign Investment

Port Watch No Spin to This Economy - Growth in Texas Is Indeed Genuine

www.txgulf.org

News

Dredging Update WRRDA Passses House, Senate; Texas Ports Step Up Dredging Activity

Secretary of Foreign Affairs of Mexico Visits Houston

Greater Houston Port Bureau | 1

Port Bureau 6

3 Captain’s Corner PBS Cameras on the Port

4 Port Watch

No Spin to This Economy

6 Mexico - Open for

(Oil & Gas) Business

Energy Reform Opens Mexico to Foreign Investment

Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Christine Schlenker Copy Editor Judith Schultz Art Director Christine Schlenker For information about the Port Bureau:

Phone: (713) 678-4300 Email: info@txgulf.org 2 | June 2014

News

15

12 Lone Star Harbor Safety Committee Update 14 Commerce Club May 2014: Wolfgang Freese, Hapag-Lloyd (Americas)

16 Secretary Meade Visits Houston

Secretary of Foreign Affairs of Mexico

Writers Dave Cooley Matt Logan Christine Schlenker Judith Schultz Patrick Seeba Front and Back Cover Photos courtesy of Lou Vest

Port Bureau Staff Jeannie Angeli Cristina Gomez Janette Molina Al Cusick Printing Company DiPuma Printing and Promotional Products www.dipuma.com

Photographer Patrick Seeba For information about the Port Bureau News stories or advertising:

Email: editor@txgulf.org www.txgulf.org

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20 Dredging Update WRRDA Passes House, Senate; Texas Ports Step Up Dredging Activity

28 NOAA/EIA Hurricane Update 30 CPE Course Awards 5 Certificates 31 James Edmonds 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 PBS Cameras on the Port A few weeks ago, PBS brought a crew out to the Port of Houston Authority to interview people for their upcoming documentary about the port, set to air in the fall as part of the Houston Ship Channel Centennial Celebration. When I was offered the chance to participate as an interviewee, I jumped on it right away. One of the biggest perks about my job at the Port Bureau is having opportunities to brag about the Port of Houston and the people who keep it running.

The interview lasted an hour and I drifted off script several times to indulge a sea story or two, but I think I was able to convey the gist of what the port does so that our fellow Houstonians can start to appreciate how much of an impact the Houston Ship Channel has had on our city.

Great cities have great ports, and Houston exemplifies this. As former Chairman of the Port Commission Fentress Bracewell said, “Houston is truly the town that built a port that built a city.” At the turn of the last century, local leaders saw the potential of something great in the muddy waters of Buffalo Bayou, and they took action to dredge and develop it. Without the people who built the port, run the port, and do business at the port, we wouldn’t have the thriving, diverse metropolitan City of

Soon-to-be movie star getting camera ready.

Houston we do today.

Just for Texas, the Port of Houston’s impact is: one million related jobs; $4.5 billion in state and local taxes; and $178 billion in economic impact. The national impact is: two million related jobs, $52 billion in U.S. taxes and $499 billion in U.S. economic impact. Nearly one-third of our gross domestic product (GDP) comes from global trade, and 99% of that by weight passes through our ports. We live in a global economy and to remain globally competitive we need to continue to invest in our ports like they did in Houston a century ago.

The interviewer also wanted to know if I thought that the average person in Houston has any idea about what goes on in the daily operations of the Port of Houston and the Houston Ship Channel. I think for many people, the port is an invisible benefactor to the city. In other cities, like San Francisco, New York, and Baltimore, the port is in the middle of the city.

You can watch the ships come and go, which makes it exciting and easy to connect with. Our large industrial complexes hugging the ship channel and the general sprawl of Houston puts the ship channel out of sight and mind for most Houstonians. I’m glad the Centennial is getting people excited about the Port, and I hope the celebrations, books, and documentaries coming out in the next few months remind people how thoroughly our whole city is connected to the ship channel.

As with many interviews, I know there are a lot of points I left out due to the time constraint. However, I very much enjoyed the hour and found the PBS crew engaging and professional. I am eager see their finished product this fall and to continue to brag about this great port. ò Greater Houston Port Bureau | 3

© Patrick Seeba

PORT WATCH

No Spin to This Economy - Growth in Texas Is Indeed Genuine Tom Marian, Buffalo Marine Service

A

s the national economy attempted to digest a GDP decline, month over month growth continued unabated throughout most of Texas’ major ports to the tune of 2.4%. This was particularly impressive in the wake of March’s 24% gain. Granted, not all the regional ports experienced back-to-back monthly gains, but the overall trend has been beyond that of the

tepid growth experienced by other regions. Inland tow movements also ticked up by 2.5% as bulk liquid commodities were shuttled between various terminals via the Gulf Intracoastal Waterway.

Unfortunately, the Port of Texas City’s April vessel arrival statistics were not part of the month’s bounty in light of a 6% monthly decline and 8% annualized drop.

This lackluster performance is due in Texas Ports Deepdraft Vessel Arrivals part to the greater flow of crude into Apr. 2014 Year-to-Date Percent Change the port via pipeline. A few miles to the south, Galveston posted the bigBROWNSVILLE, -8.0% gest monthly percentage decrease CORPUS CHRISTI, 12.5% of the Texas ports at nearly 16% but FREEPORT, 25.9% remains ahead of all but Freeport in GALVESTON, 23.5% terms of its year-to-date numbers with 23.5% more vessels than 2013.

HOUSTON, -0.5% Interestingly, over one third of its PORT LAVACA, 0.0% monthly vessel loss was attributable SABINE, 11.2% to a wane in offshore rig movements.

TEXAS CITY, -8.4% To the west of Galveston, Freeport still retains the percentage lead in the GRAND TOTAL, 4.3% 4 | June 2014

www.txgulf.org

port watch year-to-date numbers and oceangoing barge Port of Houston Deepdraft Vessel Arrivals with 26% more armovements bounced Apr. 2014 vs.

Apr. 2013 1000 rivals even though up by over 14% and there were over 13% a blistering 30% refewer vessels calls in spectively; reflecting Apr. 2014 YTD (Total: 2,673) April. The only other very strong coastwise port that finished movement of crude 500 Apr. 2013 YTD (Total: 2,687) in the red for the and shipment of month was Corpus distillates into the Christi as nearly foreign trade. Finally, 9% fewer vessels the cars ‘kept a0 moored at its varicoming’ as witnessed ous facilities. Yet, it by 11 total car carriremains 12.5% ahead ers – one more than of 2013’s pace. Thus, March - bursting at much of the monthly the seams with that decline was due to new car smell. fewer rail movements Thus ended the first-third of 2014 with every and the fact that the port was coming off of a torrid indication that the Texas trade picture exhibited few March. signs of slowing. Anecdotally, a local lawyer specialBrownsville, after three consecutive months of 21 vessel arrivals, jumped to 29 which translated to a 38% percentage gain. Nonetheless, the port still remains 8% below last year’s arrivals. On the opposite end of the state, Sabine’s vessel count climbed an additional 8.4% in April which pushed up its annualized growth rate to just above 11%. Indeed, the focal point of the monthly gains was the tank vessel movements which have been very active in the last few months; particularly to and from the Port of Houston.

izing in Admiralty litigation opined that Houston is doing very well economically given the relative dearth of litigation in the maritime arena. Consistent with this observation, others are saying that Texas is living in an economic bubble fueled by tens of thousands of new residents benefiting from shale gas, new construction, small business growth, and mile upon mile of supersized highways shuttling goods to and from the nation’s busiest port.ò

The belle of the ball in sheer numbers – Houston – tallied 55 more vessel arrivals over the last month.

This was more than the total increase for the entire state and reflects a 36% jump over the last two months and 8% since March. Curiously, the 2013 year-to-date totals are still 14 or .5% above 2014; however, this is misleading when raw tonnages are considered given that 2014 is outpacing 2013 by 4%. Nearly every vessel category saw monthly gains with the exception of chemical tankers – 4% drop – and LPG carriers – 9.6% down. Bulk carriers and general cargo vessel arrivals were up 3.5% and nearly 15% respectively signaling both strong exports and solid imports across the dock. Containers also remain steady with a 4.8% rise for the month and 4% increase on an annualized basis. Tankers

Greater Houston Port Bureau | 5

Industry Report

Mexico - Open for (Oil & Gas) Business Matt Logan, GHPB Analyst Right: Ku-Maloob-Zaap Complex in the Bay of Campeche, Mexico’s most productive oil field. Photo courtesy of Petróleos Mexicanos (PEMEX), February 14, 2014.

T

he presidential election of 2012 saw promises of “transparent, governmental reform” and a promise to curtail slow economic growth with a return to “national prosperity.” No, these were not things you heard coming out of a debate between Barack Obama and Mitt Romney; they were the words of Mexican presidential candidate Enrique Peña Nieto. Peña Nieto won the vote in a race with a record voter turnout rate of 62%.

One of his first, and largest reforms, was to de-regulate the country’s oil and gas industries.

Riding a sense of nationalism in 1938, former Mexican president Lazaro Cardenas nationalized Mexico’s oil fields and drilling rights. In the process of doing so, Cardenas also seized assets belonging to the two U.S. suppliers in Mexico at the time: Standard Oil and Royal Dutch Shell. The result of nationalization was Petroleos Mexicanos, or PEMEX. PEMEX is overseen by the Mexican government, and is the largest company in Mexico. Just to get an idea of the scope of this relationship, in the fourth quarter of 2013 PEMEX paid over $16 billion to the Mexican government. This number alone supports a third of Mexico’s annual governmental budget.

6 | June 2014

The chief thrust of the recently passed legislation is to open up Mexico’s oil and gas industries for foreign investments. The legislation keeps PEMEX as state-owned, but grants it more administrative and budgetary autonomy. Regulatory authority for the oil and gas sectors is now given to the Energy Regulatory Commission, the Secretary of Energy, and the National Hydrocarbon Commission. The new legislation also creates four oil and gas exploration and production contract models: service contracts, production-sharing, profit-sharing, and licenses. PEMEX, of course, has first rights to projects before the bidding process opens.

A Company in Free-Fall

Mexico is hoping the de-regulation will spur foreign investment and rescue PEMEX from financial

www.txgulf.org

Industry Report instability. Since 2009, PEMEX has seen a near 10% drop in petroleum products production. The company has also reported only one annual profit in the past six years. The lone profit was a mere 2.6 billion pesos ($201.5 million at 2012’s exchange rate), compared to losses of 94.4 billion pesos, 46.5 billion pesos, and 106.9 billion pesos in 2009, 2010, and 2011 respectively.

Last year PEMEX posted its biggest loss ever at 170 billion pesos, or $12.75 billion.

PEMEX's Annual Profit/Loss

50

Billions of Pesos

In 2013, PEMEX paid over 864 billion pesos in taxes and duties, nearly all of which went to the Mexican government. This represented 125% of the company’s income before taxes and duties. Prior to the new legislation, the government also had final approval of the investment budget for PEMEX. Because of this, PEMEX’s annual invest-

ment budget averaged just over 275 billion pesos over the past five years. As a result the company has fallen behind on drilling and refining technologies. In 2011, the James A. Baker III Institute for Public Policy at Rice University, in partnership with the University of Oxford, released a study which found PEMEX could have generated 48% more revenue annually from 2001-

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Industry Report 2009 had it operated more efficiently.

Recruiting Key Talent

2014 Pearson Index*

A major challenge for PEMEX, especially when it comes to research and technological advancement, is the skill level of the labor force it employs. Because it is run by the state, PEMEX employees are Mexican residents who have come up through Mexico’s educational system. Herein lies a problem; Mexico ranks 39th out of 40 countries studied by the Pearson Index, which measures cognitive skills and educational attainment.

Since 2012 Mexico has actually dropped a spot in the rankings, and is bested by other Latin American countries, such as Chile, Colombia, Argentina, and Brazil.

Even though its educational rankings are low, there are still many qualified young professionals in Mexico.

It would seem a flush government job with PEMEX which implies job security and a good pension would be a big draw for these young professionals. However,

8 | June 2014

www.txgulf.org

*measuring students’ cognitive skills & educational attainment 1. South Korea 2. Japan 3. Singapore 4. Hong Kong – China 5. Finland …………………………………….

14. United States …………………………………….

36. Colombia 37. Argentina 38. Brazil

39. Mexico

40. Indonesia

Industry Report

Greater Houston Port Bureau | 9

Industry Report a job with PEMEX does NOT offer one thing which the best of the best young professionals desire: advancement. It is because of this that much of Mexico’s best young talent goes abroad and takes jobs with private companies offering career advancement for those that excel. In many cases, young adults leave Mexico to attend college abroad, never to return. The hope is that a new, more privatized PEMEX will be able to keep Mexico’s rising stars in Mexico.

An Upgrade

Shortly after Mexico approved the legislation, the international credit agency Moody’s upgraded PEMEX’s credit rating to A3, one level up from its previous Baa1. This is the equivalent of havAbove: Centenario platform drills exploratory deep-water ing one’s credit score raised and means PEMEX can get better terms from its lenders. Preliminary wells in the Gulf of Mexico. Photo courtesy of Petróleos Mexicanos (PEMEX), March 15, 2013. estimates predict this upgrade will translate to a 1% increase in Mexico’s gross domestic product by 2018, and a 1.6% annual growth by 2025.

The upgrade comes in anticipation of foreign

10 | June 2014

www.txgulf.org

industry update investment that may now flow into Mexico’s oil and gas industry. Some estimates are as high as $30 billion of foreign investment by 2025. Mexico has not had the technology and investment needed to get to deep-water reserves or take advantage of the recent shale boom offering investors unlocked potential for profits..

Oil services company Baker Hughes reports Mexico has only four operational deep-water platforms in the Gulf of Mexico, compared with 53 for the United States. Mexico has proven deep-water reserves of 10.3 billion barrels of oil and 17.3 trillion cubic feet of natural gas. PEMEX’s CEO, Emilio Lozoya, thinks the reserves could be nearly three times this amount, and says the Perdido Fold Belt alone holds 8-13 billion barrels of oil-equivalent. The shale formations of West Texas also reach down to large portions of Mexico, and the EIA estimates Mexico holds the world’s sixth largest shale reserves. Already at least six shale formations have been identified, boasting 460 trillion cubic feet of unexploited shale gas.

“...EIA

estimates Mexico holds the world’s sixth largest shale reserves.”

turn the public against him, and the legislation, if this promise does not hold true.

Another hurdle is the National Union of Mexican Oil Workers must relinquish its five seats on PEMEX’s board. This will trim the number of Board Members from 15 to 10, and the new board will be composed of five governmental officials chosen by the president and five independent members. The ultimate goal is for PEMEX to no longer operate as an arm of the state, and instead as a private company. To aid in this process, the Mexican government plans to allocate $28 billion in 2014 for PEMEX’s oil exploration and production.

CEO Lozoya says the new PEMEX will be modeled after Petroleo Brasileiro SA of Brazil, Statoil ASA of Norway, and Ecopetrol SA of Colombia, all of which were state controlled before being opened to foreign investment.

Secondary legislation, introduced in early May and hoped to be finalized by August, requires foreign investors to use Mexican equipment and services for 25% of their operations by 2025. This should increase employment by two million jobs for the Mexican economy. Realizing the difficult but rewarding path his country has in front of it, President Nieto proclaimed, “We’ve decided to overcome the myths and taboos to take a great leap into the future. A new history begins for our country.” ò For more information, contact Matt Logan at mlogan@txgulf.org or (713) 670-1267.

All total, Mexico’s potential approaches the $15 trillion mark, which will definitely attract some suitors. Mexico hopes that with this influx of capital and technology, output will reach 4 million barrels per day by 2025; Mexico’s current pace is a mere 2.47 million barrels per day. Mexico also hopes natural gas production will nearly double to 14.6 billion cubic feet per day.

Still a Long Way to Go

Simply enacting and passing the de-regulating legislation will not rescue PEMEX, or Mexico’s oil and gas industries. In order to gain public support for the de-regulation, President Peña Nieto vowed none of the 153,000 PEMEX employees would lose their job due to the legislation, which could

Greater Houston Port Bureau | 11

LSHSC

Lone Star Harbor Safety Committee Update From the Full Committee Meeting May 9 Matt Logan & Christine Schlenker, GHPB

T

he Lone Start Harbor Safety Committee (LSHSC) held its second quarterly full meeting of 2014 on May 9th at the new Coast Guard Sector Houston-Galveston Command offices at Ellington Field. This was the first full meeting for new LSHSC Chairman, Capt. John Peterlin, who was announced as the incoming chairman at the February full meeting, along with several other new committee members.

Capt. Peterlin attended many of the subcommittee meetings over the past three months to bring himself up to speed with the activities of each committee. On the May agenda were four subcommittee reports and remarks by Coast Guard Sector Houston-Galveston regarding response to the recent Texas City Y incident.

As is custom for all LSHSC full meetings, the chairs of each of the four subcommittees reported on pending and recent work and issues faced by their respective committee. The following are just a few highlights from the reports.

Training & Outreach: As the subcommittee continues to focus on communications and information sharing, members shared several upcoming events that will bring more focus onto the port community and maritime education. The chair of this subcommittee is Tammy Lobaugh, lobaught@tamug.edu.

Navigation Operations: The next Brownwater University is scheduled for September. The subcommittee reported several pending issues, included slack lines and congestion near Bolivar, and is considering creating an industry best practices document regarding the congestion. Two subgroups will commence meetings in the near future: Bridge to Bridge and Casualty. The chair of this subcommittee is David Foret, davidf@theagcteam. com.

12 | June 2014

Waterways Utilization: The committee is monitoring trends around the port, and reported several new facilities and docks under construction.

Navigation Operations and the Waterways Utilization announced they will hold a joint session in June to discuss topics and issues that commonly come up for both subcommittees. The chair of this subcommittee is JJ Plunkett, jplunkett@houstonpilots.com.

Dredging & Marine Construction: The committee will supply updates to the best practices document featured on the subcommittee website, and provided several dredging project updates. Future discussions will involve: dredging issues for the Gulf Intracoastal waterway, planning for increased traffic in the future, and outreach to recreational boaters. The chair of this subcommittee is David Casebeer, david@shoalest.com.

Coast Guard Sector Houston-Galveston gave a presentation over the response to the Texas City Y incident in March. The presentation highlighted the joint effort of the entire maritime community, which banded together to open the waterway as soon as possible. All response work was completely voluntary by non-Coast Guard personnel, but that didn’t stop people from showing up to help within an hour of the incident. The Port Coordination Team (PCT), composed of rep-

www.txgulf.org

LSHSC resentatives from various industry and public interest groups, aided the response by providing an information depot and linking industry and government response efforts.

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The meeting closed with heartfelt thanks and best wishes to two committee members who have been instrumental in the success of LSHSC as they move on to other roles. LCDR Xochitl Castañeda of Sector Houston-Galveston will be leaving for her next assignment in Seattle, and John Salvesen stepped down as a long-time representative.

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The next LSHSC full meeting will take place August 8th, 2014, and its meeting location will be announced closer to the event. If you are interested in participating, contact one of the subcommittee chairs aforementioned, email info@lonestarhsc.org, or visit lonestarhsc.org to see the current meeting calendar. ò

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Greater Houston Port Bureau | 13

COMMERCE CLUB

May 2014 Commerce Club With Wolfgang Freese, President Hapag-Lloyd (Americas) Judith Schultz, GHPB

N

avigare necesse est: To sail is necessary.

Wolfgang Freese, president of HapagLloyd Americas, quoted the Latin phrase familiar to mariners as he introduced his remarks at the Greater Houston Port Bureau’s Commerce Club luncheon at Brady’s Landing on May 8. Referencing the classic tale of Pompey’s voyage through stormy seas as an illustration of striving together in difficult times to achieve a successful voyage, Freese shared HapagLloyd current events in a four –part presentation.

Freeze elaborated on the recently announced merger between Hapag-Lloyd and CSAV, explaining that regulatory approval is expected by September 2014, and that the container business would be fully integrated into Hapag-Lloyd business over a one year process.

The merger of the two companies will bring HapagLloyd from a number six position to number four in the shipping industry, increase vessels from 150 to 210, and expand container capacity to 1.1 million TEUs. He showed a snapshot of the current shareholder structure and an overview of Hapag-Lloyd operations.

Wolfgang Freese addresses the Commerce Club. their footprint at Barbours Cut with additional space.

Four new shore cranes are expected to be delivered and operational by spring of 2015 to accommodate the G6 Alliance service. Freese expressed his appreciation for the Houston Pilots and the Port of Houston Authority for the “close cooperation” Hapag-Lloyd receives here.

Steve Stewart, chairman, Gulf Winds International, surprised Freese at the conclusion of his remarks, by presenting Freese with a U.S. flag, authenticated as flown over the Washington D.C. capitol on January 11, 2014 – the day Mr. and Mrs. “Double-digit growth probably won’t happen in Wolfgang Freese were sworn in as U.S. citizens. my lifetime,” said Freese as he discussed the current Stewart made the presentation of the flag on behalf of market environment, indicating a 3.6% growth in global Congressman Gene Green, representative 29th District GDP. He cited energy costs and investments necessary of Texas. for environmental and security measures as among the Rick Shannon, president of Atlantic Ro-Ro major challenges in the liner shipping business.

Carriers, will be the speaker at the next Commerce In Houston, Hapag-Lloyd plans to expand Club luncheon on June 12, 2014. ò

14 | June 2014

www.txgulf.org

Above Left: Kimberly Foster Renko and Ian Foster of IBC Bank talk with Johnny Jennings, JGJJ Interests.

Above Right: Networking before lunch.

Opposite: L to R, Steve Stewart, Gulf Winds International; Wolfgang Freese, holding the commemorative U.S. flag; Dennis Hansell, Suderman & Young Towing; CAPT Bill Diehl, Greater Houston Port Bureau.

Opposite Page Lower: Attendees absorb the news as Wolfgang Freese presents an update on HapagLloyd events.

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Greater Houston Port Bureau | 15

community update

Secretary of Foreign Affairs of Mexico Visits Houston Christine Schlenker, GHPB José Antonio Meade Kuribreña is the Secretary of Foreign Affairs of Mexico on President Enrique Peña Nieto’s cabinet. Meade served as Secretary of Energy and Secretary of Finance and Public Credit under Felipe Calderon Hinojosa, the previous president.

O

n Wednesday, May 14, 2014, the Mexico Center at Rice University’s Baker Institute hosted its inaugural lecture event featuring His Excellency José Antonio Meade Kuribreña, secretary of foreign affairs of Mexico. Meade is an accomplished lawyer and economist, and earned his law degree from Universidad Nacional Autónoma de México (UNAM) and his Ph.D. in economics from Yale University. Meade has served in the cabinet of the last two Mexican presidents from different political parties. Introductions from the Honorable Edward P. Djerejian, Founding Director of the Baker Institute and from David W. Leebron, President of Rice University, highlighted the close economic and policy ties between Houston and Mexico. Rice University has another interest in U.S.- Mexico relations - the Baker Institute is named after James A. Baker III, who was the U.S. Secretary of State during the NAFTA negotiations 20 years ago.

as an “economic block of importance.” The Pacific Basin – one of the first trade routes established - is Mexico’s second largest trading partner at $140 billion. Mexico shares many cultural and political frameworks with Europe, and 30% of exports outside of North America go to Europe.

Meade then pointed out that Mexico’s trade with North America was an order of magnitude above most other regions, and the bulk of that trade is with the U.S. Annual trade between the U.S. and Mexico is over $500 billion, and “we trade more than $1 million dollars every minute.” Although 22 U.S. states claim Mexico as their top foreign trading Meade focused on the important role Mexico’s partner, Texas unique geography plays in its foreign policy decisions is particularly and its political dialogues with trading partners. With important for the Caribbean, Mexico shares information on preparing Mexico’s trade, and recovering from natural disasters, transportation coming in at $195 challenges, and tourism. Mexico encourages peace and billion annually. prosperous inclusiveness with neighboring Central “We trade with America. One of the largest cultural and economic Texas more than partners is Latin America - 80% of Mexicans consider any single one themselves Latin American. With $30 billion in trade of our other Port of Houston Authority Houston: America’s Distribution Center and Mexican investment of $85 billion in the region, geographical www.portof houston.com/map Mexico is interested in integrating Latin America belongings,” said 16 | June 2014

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community update Meade. “We trade with Houston more than we trade with Canada.”

Mexico is not only the 14th largest economy in the world and growing, but is also the fourth largest exporter of vehicles, sixth largest exporter of aerospace goods, and top exporter of flat screen TVs. Meade joked that he hoped that these TVs would be great for watching the Mexican national team win during the upcoming World Cup, though if Mexico did not do well, they would root for the U.S. for defeating Panama and allowing Mexico to get into the World Cup at all. Mexico is increasingly an export country, and 83% of exports are manufactured goods. With the interconnectedness of the U.S. and Mexican economies, this means that “every dollar that we (Mexico) export includes 40 cents that we purchase from goods manufactured in the U.S.” Meade said topics of mutual interest for improving the “shared and inclusive prosperity” for the U.S. and Mexico include identifying new ideas for cooperation,

José Antonio Meade Kuribreña, secretary of foreign affairs of Mexico with Dr. Tony Payan, Director of Baker Institute’s Mexico Center.

Photo courtesy of the Baker Institute. May 14, 2014. namely in innovation and education to prepare a global workforce. In addition, Mexico is working on transforming policies on energy, climate change, transparency, and citizen security, among others, to increase the openness, competitiveness, and sustainability of the Mexican economy.

Greater Houston Port Bureau | 17

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community update Following his lecture, Meade sat down with moderator Dr. Tony Payan, Director of the Mexico Center, to answer audience questions. Meade explained that the next meeting of the Pacific Alliance (Colombia, Peru, Chile, Mexico) will focus on facilitating free trade, decreasing the barriers for citizens to work and visit between countries, and improving the integration of the joint economies.

Previously successful programs included eliminating visa requirements and jointly promoting tourism.

In regards to the Central America regional cooperation agenda, Mexico is identifying specific projects that will bring about integration and investing in those projects. One example is energy integration: the region is about to connect the electricity grid of Central America with Mexico and will soon bring gas to Central America. This should help the region as a

whole develop, as the cost of electricity generation in Central America is currently three times the generation cost in Mexico. The main challenge in implementing Mexico’s own energy reform is first, to get the get secondary legislation approved. Following that, Meade felt Mexico was fully capable of handling the administrative and operational challenges.

One of Mexico’s biggest challenges is to increase productivity and bring better services to a middle class.

The country needs to generate better conditions for growth by reducing rigidities in labor and energy and enacting education reform. Some of the recently passed fiscal reform, which is not entirely popular, increased tax rates to balance the resources required to provide the services that were expected while still maintaining a globally competitive tax burden. ò

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Greater Houston Port Bureau | 19

U.S. Army Corps of Engineers Galveston District performs maintenance dredging in Nueces County, TX near Corpus Christi to deepen the La Quinta Channel. Photo credit: Chip Worley, January 2013.

WRRDA Passes House, Senate; Texas Ports Step Up Dredging Activity Judith Schultz & Matt Logan, GHPB

T

he conference report for the Water Resources Reform and Development Act (WRRDA), or H.R. 3080, was approved by both the House of Representatives and the Senate at the end of May. The House vote was 412-4 and the Senate vote was 91-7, both in favor of passage. The bill is now on the president’s desk, waiting to be signed into law. The joint conference committee of the U.S. House of Representatives and U.S. Senate took right at a year to come up with a bill that would pass both legislative chambers, after both chambers passed slightly different bills in 2013. The last water resources bill was passed in 2007.

WRRDA 2014 aims at reforming bureaucracy, accelerating project delivery, and streamlining environmental reviews. It also reforms the way funds 20 | June 2014

are spent for operations and management of U.S. waterways. For U.S. ports, it will increase the amount of the Harbor Maintenance Tax allocated for operations and management. The bill requires 67% of the Harbor Maintenance Tax revenue for 2014 be used on U.S. ports and harbors in 2015, with the percentage steadily increasing until 100% allocation is reached in 2025.

Part of accelerating project delivery in the bill deals with re-evaluating stagnant projects and prioritizing new ones. WRRDA 2014 de-authorizes $18 billion of old, inactive projects, and kick starts numerous new ones, including waterway improvements for Freeport, Sabine Neches and Corpus Christi.

Bayport, Barbours Cut Getting Deeper, Wider

The Port of Houston Authority announced on May 19 they have received permits from the Army Corps

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DREDGING UPDATE of Engineers for channel improvement projects for the Barbours Cut and Bayport terminals as well as approval for federal assumption of the maintenance of the channels when the work is completed.

According to a press release from the Port of Houston Authority, the improvement projects at the two container terminals will deepen the channels from 40 feet to 45 feet, matching the depth of the Houston Ship Channel, so the container terminals can realize the benefits of the HSC widening and deepening project completed in 2005. The project will also widen or realign the channels by up to 100 feet to better accommodate larger ships that are expected to call with increasing frequency.

infrastructure sector and headquartered in Houston, with construction and dredging to start immediately.

The work also encompasses an increase in the capacity of a placement area for future dredged material.

“This is great news,” said Port Commission Chairman Janiece Longoria, “We are investing in the future of our port. The projects demonstrate our commitment to facilitating commerce. I sincerely congratulate the Port Authority staff for its diligent efforts working with PHA’s stakeholders, the community and the Corps to get these projects readied for construction.”

The $68 million construction contract was awarded to Orion Marine Group, Inc. (NYSE: ORN), a heavy civil marine contractor serving the Greater Houston Port Bureau | 21

DREDGING UPDATE “Overall, the project has really progressed at a quick pace,” said Executive Director Roger Guenther. The federal approval of assumption of maintenance, which means the Corps of Engineers will resume responsibility for the channel after PHA’s improvements, was a great team effort between the Corps and PHA on a complicated process that has taken only 18 months.”

The Port Authority is funding the projects at its sole cost to ensure the Port’s readiness for the larger container ships expected in the near future and in advance of the opening of an expanded Panama Canal in 2016. The work is expected to be completed in the second quarter of 2015.

HSC $8.2 Million Dredging Contract Awarded

The PHA’s announcement follows the awarding of a contract in the amount of $8,286,580 in April by the U.S. Army Corps of Engineers Galveston District

22 | June 2014

(USACE) to RLB Contracting Inc. for ship channel dredging. RLB Contracting will perform maintenance dredging within the Houston Ship Channel, from Carpenters Bayou to Greens Bayou, as well as the deep-draft portion of Greens Bayou Channel.

RLB will remove approximately one million cubic yards of shoaled material from the channel reaches to provide sufficient channel depth for the transit of deepdraft vessels. Work began in May and is projected to be completed in January 2015.

WRRDA Prompts Waterway Improvements for Freeport, Sabine Neches, and Corpus Christi

Up and down the Texas Gulf coast, other projects have been announced. USACE issued a press release on May 16 reporting authorization for construction for the deepening of the Freeport Ship Channel to 55 feet, deepening of the Sabine Neches Waterway to 48 feet, and reauthorizing the Corpus Christi Ship Channel

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DREDGING UPDATE for widening and deepening to 52 feet. This followed the U.S.SenateHouse joint conference committee’s agreement on the Water Resources Reform and Development Act (WRRDA) on May 15, 2014.

“The 2014 WRRDA promotes our nation’s competitiveness and economic growth along the Texas coast by providing the necessary funding to modernize our ports,” said Bill Wise, chief of the Project Management Branch for the USACE Galveston District. “These channel improvements will support the federal responsibility of maintaining a strong maritime transportation

Maintenance dredging in Galveston Bay. Photo credit: USACE Galveston District Public Affairs Office.

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DREDGING UPDATE infrastructure to ensure the efficient flow of domestic and international commerce.”

Although the bill authorizes funding for the projects, federal funding will need to be appropriated each year on an ongoing basis to cover the scale and expense of the projects.

Wise said ongoing costs would be shared by the local, state and federal governments. Combined, the total projects’ cost is approximately $1.825 billion, with 58 percent, or $1.06 billion, assumed by the federal government.

to relieve channel draft restrictions in the Brazos Island Harbor (Brownsville Ship Channel) navigation project.

“Unanticipated shoaling within the federal ship channel prompted the Brazos Santiago Pilots

“Construction of these three projects will provide navigation infrastructure improvements needed to help support more than $100 billion in non-federal investment occurring at ports along the Texas coast,” Wise said. “Additionally, the 2014 WRRDA will reduce the time it takes for project approvals, allow for concurrent reviews, supports streamlining environmental reviews and puts the trust back into the Harbor Maintenance Trust Fund.” $2.4 Million Dredging Contract Awarded for Brownsville Ship Channel

USACE began a $2,455,000 maintenance dredging contract with Manson Construction Company on April 1, 2014

Greater Houston Port Bureau | 25

DREDGING UPDATE Association (Brownsville Harbor pilots) to issue a draft restriction limiting vessels calling the Port of Brownville to a draft of 37.5 feet,” said Chris Frabotta, chief of the USACE Galveston District’s Navigation Branch. “We are aware that the imposed draft restrictions have significant economic impact on the port and acted to solicit a dredging contract to address these navigational safety hazards and relieve the restriction.”

Approximately 340,000 cubic yards of shoaled material from the jetty channel reach will be removed to relieve the current draft restriction. The contract calls for the dredged material to be placed in the shallow waters of the near-shore berm (open water area close to the beach) to allow the dredged material to move toward the beach and provide benefit to the

shoreline (located in shallow Gulf waters adjacent to South Padre Island).

“We will continue to work closely with our nonfederal sponsor (Port of Brownsville) to ensure the channel remains open for navigation and with our other project stakeholders (City of South Padre Island, Texas General Land Office and Cameron County Parks) to make every attempt possible to place future channel maintenance material on the adjacent shoreline of South Padre Island,” said Frabotta. ò Ed. Note: Some dredging data provided by the U.S. Army Corps of Engineers Galveston District Public Affairs press releases. For more details, please see www.swg.usace.army. mil.

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hurricane update

NOAA predicts relatively quiet Atlantic hurricane season S

unday, June 1, marked the beginning of the 2014 Atlantic hurricane season.

The National Oceanic and Atmospheric Administration (NOAA) predicts a relatively inactive June-November hurricane season this year, following the quietest hurricane season in the past two decades in 2013. NOAA projects a 70% probability of 8-13 named storms this hurricane season, of which 3-6 will strengthen to hurricanes, with 1-2 becoming major hurricanes. Over the past 10 years (2004-13), the Atlantic hurricane season has averaged 16.3 named storms, 7.7 hurricanes, and 3.2 major hurricanes.

Credit: NOAA

The effects that named storms this year in the Atlantic will have on Gulf Coast crude oil and natural gas production will depend on their trajectory and strength. Last year, only one named storm—Tropical Storm Andrea—made landfall in the United States, and it did not cause any disruptions to crude oil or natural gas production. The U.S. Department of Interior Bureau of Safety and Environmental Enforcement (BSEE) reported only one instance of shut-in oil and natural gas production last year, during Tropical Storm Karen in October. The last year that the United States experienced significant shut-ins was 2008, when two significant hurricanes affected oil and natural gas production: Hurricane Gustav, which made landfall in Cocodrie, Louisiana, on September 1, and Hurricane Ike, which made landfall in Galveston, Texas, on September 13.

The effect of hurricanes on oil and natural gas production has been reduced in part by an increasing portion of U.S. production coming from inland basins such as the Bakken Shale play in North Dakota, the Williston Basin in Montana, 28 | June 2014

and the Marcellus Shale play in the Appalachian Basin.

EIA’s June 2014 Short-Term Energy Outlook (STEO, to be released on June 10) will project natural gas production factoring in an expected decrease from Gulf Coast hurricane and tropical storm shut-ins, based on NOAA’s Atlantic hurricane outlook. In the event of a more active hurricane season, greater production decreases could have a noticeable effect on markets.

Source: U.S. Energy Information Administration, based on National Oceanic and Atmospheric Administration (NOAA), Climate Prediction Center, Atlantic Hurricane Outlook, issued May 22, 2014 Note: NOAA classifies named storms as hurricanes when their maximum sustained surface wind exceeds 74 miles per hour, and major hurricanes when their maximum sustained surface wind exceeds 110 miles per hour.

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hurricane UPDATE Natural gas inventories enter the 2014 hurricane season at an 11-year low, following record-high storage withdrawals this past winter. The May STEO forecasts an average weekly storage injection of 88 billion cubic feet (Bcf ) from now through the end of October to reach a prewinter gas inventory level of 3,405 Bcf. Although this would be a record storage build, the United States would start the 2014-15 winter season with working natural gas inventories that are well below the end-of-October storage levels over the past five years.

Source: U.S. Energy Information Administration calculations based on data from the Bureau of Safety and Environmental Enforcement (BSEE)

EIA plans to issue an analytic report on the 2014 hurricane season in conjunction with the STEO scheduled for release on June 10. EIA also continues to provide real-time storm tracking information through the mapping interface on its website that allows users to track storm trajectory and energy infrastructure. ò

Ed. Note: The above article was originally published by the U.S. Energy Information Administration on June 4, 2014. The principal contributor of the article was Michael Ford. For more information, visit http://www.eia.gov/ todayinenergy.

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in the community

Participants Enhance Knowledge, Skills at Certified Port Executive Training Judith Schultz, GHPB

Participants traveled far and wide to take the 5-day Certified Port Executive course. The graduates pose with their certificates on May 23, 2014. L to R: Ross Pruett, Briggs Equipment (Dallas); Instructor Capt.

Jeffrey Monroe, Marpro Associates International (Cape Elizabeth, ME); Jeannie Angeli, GHPB, who helped award the certificates; Alfred Henley, British Virgin Islands Ports Authority (Tortola, British Virgin Islands); J.J. Plunkett, Houston Pilots (Houston); Robert Maxwell, Port of Rosedale (Rosedale, MS); Marcos Cantu, Texas Dock & Rail (Corpus Christi).

F

ive participants received certification in the CPE Certified Port Executive Program™ developed by MacDonnell Group and hosted by the Greater Houston Port Bureau on May 23, 2014. Attendees completed professional education related to the transportation system and the operations of ports, vessels, and marine terminals. Instructed by Capt. Jeffrey W. Monroe, Master Mariner, Master-Transportation Management, with 35 years’ experience in the port and transportation industries, the course covers rapidly changing regulations and requirements that affect ports, marine facilities, intermodal transportation providers, vessels, and a diverse range of service-providers through 17 learning modules over a 5-day period.

Ross Pruett, Vice President of National Accounts at Briggs Equipment in Dallas, said of the course: “While every participant in the room has been around land, ocean and airports for most of our working careers, everyone agreed that Capt.

Monroe gave us all something valuable to take away. More particularly, for a port equipment supplier like Briggs Equipment, the course gave me a 30 | June 2014

holistic and contextual perspective on the complexity and impact of executive decisions throughout the entire logistics chain – some of which I immediately shared with the Briggs port teams.”

If you are interested in participating in a future offering of the Certified Port Executive Program™, please call the Port Bureau at (713) 678-4300. ò

www.txgulf.org

in the community

Former Port Commission Chairman Edmonds Remembered For Consummate Judith Schultz, GHPB Public Service

J

ames T. Edmonds, long time civic leader and former chairman of the Port of Houston Authority died unexpectedly at home in Houston on May 11, 2014 at age 69. Edmonds was noted for his devotion to public service and, particularly, for advancing the interests of the Port of Houston.

James Edmonds began his career in James T. Edmonds public service at Houston City Hall under then-mayor Louie Welch after graduating from Abilene Christian College with a degree in government in 1966. Edmonds’ memorial mass biography quotes him recalling his first service experiences and saying, “If I had known what I was getting into, it might have been different. But I was just a little ignorant kid from New Mexico who got stuck in a back office at City Hall, handed a city phone book, and told to answer citizen complaints. It was a grueling experience, but I sure learned a lot about city government.”

He went on to work as Mayor Welch’s executive assistant for ten years.

The “little ignorant kid from New Mexico” became a consulting principal with KPMG-Peat Marwick and a founding partner of the Masterson, Moreland, Sauer & Whisman, Inc. investment firm (now First Southwest Company). Edmonds ultimately became president of his own business consulting firm, Edmonds & Company.

Edmonds was appointed to the Port Commission in 1996, representing Harris County. He was appointed chairman of the Port Commission in 2000 and served through 2012. He oversaw the Port of Houston during a time of exceptional growth. His leadership and vision is credited with positioning the Port to manage its increasing cargo demands and leading the strategy to obtain the permit to build the Bayport Container and Cruise Terminal.

Committed to raising public awareness of the Port’s significance to regional economic development, Edmonds spoke frequently to groups as well as individuals.

He raised the Port’s profile through an informative advertising campaign and traveled extensively to promote business with the Port of Houston. Edmonds received numerous awards for his tireless efforts and was honored as the Greater Houston Port Bureau’s 2006 Maritime Person of the Year.

“Please do not think for a second that one person is responsible for the many beneficial things that have happened at the port in recent years,” Edmonds said as he accepted his Maritime Person of the Year award. “I rely heavily on my colleagues in the Port Commission, whose guidance and wise counsel I could not do without. And also the professional staff of the Port Authority which does an extraordinary job of keeping Houston one of the world’s finest ports.”

Numerous colleagues and friends honored Edmonds at a memorial mass on May 19, 2014 at St. John Vianney Catholic Church in Houston, Texas. Memorial contributions may be made to the “Edmonds Children’s College Fund,” c/o Prosperity Bank, Attention: Teller Line, 55 Waugh Drive, Suite 100, Houston, Texas 77007. ò Greater Houston Port Bureau | 31

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