April 2015 Port Bureau News

Port Bureau April 2015

Greater Houston Port Bureau

News

Spotlight on Manchester Terminal

www.txgulf.org

Port Bureau

News

Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Emily Mitchell Copy Editors Emily Mitchell Judith Schultz

16 Crude Oil by

Rail: What Goes Around Comes Around 3 Captain’s Corner Celebrating the Transportation Industry

4 Port Watch

February Vessel Arrivals Suggest a Robust First Quarter

6 Securing Rights

Against a Vessel on Maritime Property and Relief Therefrom

24 Spotlight

on Manchester Terminal

10 Refinery Strike Update

30 DHS Establishes New Task Forces To Protect Southern Border

34 Commerce Club

March 12, 2015, featuring COL. Richard P. Pannell, District Commander, Galveston District, U.S. Army Corps of Engineers

Guest Article from Galloway Johnson

Writers Dave Cooley Emily Mitchell Judith Schultz Cover Photograph L Frederick Hinojosa Port Bureau Staff Jeannie Angeli Al Cusick Megan Essenmacher Cristina Gomez Janette Molina Christine Schlenker Patrick Seeba Printing Company DiPuma Printing and Promotional Products www.dipuma.com For information about the Port Bureau: Phone: (713) 678-4300 Email: info@txgulf.org

Like us on Facebook facebook.com/portbureau 2 | April 2015

Art Director Kyle Beam

Follow us on Linkedin linkedin.com/company/ greater-houston-portbureau

www.txgulf.org

For information about the Port Bureau News stories or advertising: Email: editor@txgulf.org

Captain's Corner

Celebrating the Transportation Industry Next month is a busy time for us here at the port as we celebrate the transportation industry and its substantial contributions to our economy and our communities. The month of May is host to National Transportation Week (May 1115), National Defense Transportation Day (May 15), and National Maritime Day (May 22) – plenty of opportunities to show your support for the industry and the seafarers who man the front lines.

The history behind these observances reflects the transportation industry at its finest and most stubborn – which are quite often the same thing. National Maritime Day is observed on the date of the first transoceanic sailing by a steamship, heralded as a technological triumph and the beginning of the steamship age. The SS Savannah set sail from Savannah, Georgia, on May 22, 1819, and arrived in Liverpool, Ireland, just over 29 days later.

The sight of a vessel approaching without raised sails was so unexpected that an attendant at the signal station assumed the vessel was on fire and dispatched a rescue boat. The Savannah elicited excitement and praise during her several months touring Europe, as well as patriotism from Americans living abroad and consternation from jealous European mariners who had not come up with the idea first.

Although it was another two decades before ocean-going steamships were commercially viable, the Savannah’s impact on seafaring led Congress in 1933 to choose her iconic sailing date to recognize the contributions of merchant marines.

Not long after, during World War II, the merchant marines suffered the secondhighest casualty rate of the American armed forces. Since then, National Maritime Day has taken on even more significance as it also represents the Merchant Marine Memorial Day recognizing that sacrifice.

National Transportation Week has its origins right here in Houston. In 1952, the

Women’s Transportation Club of Houston started a scholarship program to encourage students to pursue transportation-related degrees at the University of Houston.

However, after no one even applied for the scholarship, the Club’s educational chairman, Charlotte Jones Woods, realized that the root of the problem was a lack of public knowledge of the transportation industry’s impact. The next year, the Club arranged for a Houston Transportation Week and, by 1954, ten Texas cities and towns were celebrating Texas Transportation Week.

On the heels of this quick victory, Woods and the Texas members of Traffic Clubs International tried to bring recognition of the transportation industry to the national level but repeatedly returned from Washington, D.C., without success. Traffic Clubs International officers and National Transportation Week supporters spent countless hours lobbying for recognition. The group persisted for eight years and President Kennedy finally declared a permanent observation of National Transportation Week in 1962.

This year, local and national organizations will recognize National Transportation Week and National Maritime Day through a host of events, including several here in Houston.

• Wednesday, May 13: The Houston chapter of the National Defense Transportation Association is hosting a luncheon at Brady’s Landing that includes a tour of the Harris County Sheriff ’s Office’s Mobile Command, a Port of Houston Authority fireboat water cannon salute, and guest speakers.

• Thursday, May 14: The Port Bureau is hosting its monthly Commerce Club luncheon at Brady’s Landing featuring Capt. Tim Downs, General Manager of Shipping & Maritime – Americas at Shell Trading (U.S.) Company and Port Bureau executive board member.

• Friday, May 15: The Houston

CAPT Bill Diehl, USCG (Ret.) Transportation Professionals Association is hosting a group outing to watch the Houston Astros play at Minute Maid Park.

• Monday, May 18: The Houston Air Cargo Association is having its 42nd annual Scholarship Golf Tournament in honor of National Transportation Week at Walden on Lake Houston Golf and Country Club.

• Wednesday, May 22: The U.S. Maritime Administration in Washington, D.C., will host a commemoration and President Barack Obama will issue a proclamation supporting National Maritime Day. Make sure to mark these events on your calendar and show your support for this vital industry. Last year, Port of Houston stakeholders dedicated a great deal of their time bringing the public’s attention to the Houston Ship Channel Centennial as well as the men and women who ensure it operates safely and efficiently. Our port could not run without the businesses and individuals involved in transportation, so let’s keep that wave of recognition rolling in 2015 – starting with May’s celebrations of the transportation industry.

ò

Greater Houston Port Bureau | 3

© Christine Schlenker

PORT WATCH

February Vessel Arrivals Suggest a Robust First Quarter Tom Marian, Buffalo Marine Service The mud month, as the Old English were apt to call February, is often viewed as a dreary and forsaken month by those who dwell in cooler climes. Fortunately, given its typical four-week lifespan, the month does not linger and swiftly yields to the milder days of March. However, its briefness tends to produce lackluster numbers on the trade front. Intuitively, that is to be expected. Yet, the February of 2015 posted vessel arrivals in Texas that were a marked departure from the norm vis-à-vis January. In fact, the stage appears to be set for a very robust quarter.

How robust? Writ large, Texas ports were off just under 4% against a month with 10% more days. Hence, the yearto-date performance jumped over 8% as compared to the first two months of 2014.

When one throws inland tow movements into the mix, 2015’s numbers are outpacing 2014’s by 17% despite a nearly 5% monthly wane. This is quite heartening in the wake of rate softening in the tank barge market thanks to the reduced demand for crude

4 | April 2015

condensate tows - an outgrowth of sub$50 per barrel crude oil.

Similarly, the ports of Texas City and Sabine, both of which are dominated by the movement of petrochemical feedstocks and products, experienced marked monthly gains in terms of vessel arrivals. Texas City benefited from a substantial jump of activity at its storage terminals, resulting

in a 7% gain for the month but a more than 7% lag on a year-to-date basis. Sabine’s monthly increase was shy of 13% and is also in the black for the year to the tune of 5%.

On the other hand, the “fracking” ports of Brownsville and Corpus Christi did not fare as well, with a 19% and 23% monthly slide, respectively. The good news

Texas Ports Deep Draft Vessel Arrivals Feb. 2015 Year-to-Date Percent Change

www.txgulf.org

Port of Houston Deep Draft Vessel Arrivals

port watch

Feb. 2015 vs. Feb. 2014

is that January’s superb performance still permits both ports to claim double-digit year-to-date gains – 12% for Brownsville and just below 16% for Corpus Christi.

This reflects some tapering in the nearby shale gas fields but scores of wells that have recouped their initial investment are still pumping condensate into a market hungry to move such cargoes aboard tank vessels and barges.

Port Freeport could not claim the same silver lining as its cousins to the south given that it was faced with “double-double-digit negatives.” That is, a lackluster January was succeeded by an equally poor February, yielding a month-over-month 15% decline and a year-to-date loss of approximately 23%. The nearby Port of Galveston was also in the red for the month by a modest 4.5%. Nonetheless, this relatively paltry diminishment means Galveston remains in the positive side of the vessel arrival ledger by 4%.

Houston’s month-to-month arrival numbers were somewhat impressive with its mere 2.6% decline given that it added to the port’s overall year-to-date climb, which now stands at 13.5% against 2014.

The mix of vessels calling on the port is

somewhat insightful with respect to what is unfolding beyond the pier in the import realm and beyond the horizon on the export front. The latter, dominated by chemical tankers, is rebounding with a fury thus far. February’s chemical tanker count leapt 28% and is outpacing 2014 by 42% in the first two months of the year. Inexpensive crude is driving down production costs for many of these chemicals that are being exported to ports throughout the globe.

To a lesser extent, the same holds true for the price of distillates that are being exported by tankers. While tank vessel movements were flat for the month, despite 10% fewer days they are up 8% for the year. LPG is also enjoying a healthy resurgence in the early stages of 2015 with a 4% waxing in the last month and an impressively steep 51% climb for the year so far.

Houston’s imports also had a very respectable month. Bulkers were off a scant 1% for the month but have regained positive territory for the year by 2%.

General cargo vessels had a somewhat precipitous decline of 28%, but that was not enough to drag this vessel category out of positive territory for the year. Containers

are still strong as 14% fewer ships for the month cumulatively unloaded a greater amount of goods at Houston’s container terminals. Car carrier traffic is trending flat to negative for the first part of the year as importers are sensing a cooling of demand due to much more cautious energy exploration throughout the state.

All in all, the fear of a prolonged cheap barrel of oil, dampened demand for manufactured goods from overseas markets, and a strong greenback in anticipation of higher interest rates have had a negligible impact on Texas’ very healthy maritime trade environment. Undoubtedly, more shale gas wells will be shut in, capital expenditure budgets will be slashed, and exuberant purchases will be reined in until oil rebounds to $70 per barrel territory.

Nevertheless, tens of billions of dollars in private sector infrastructure investment cannot be ignored or taken lightly. As such, the mud of February, or the fogs of March for that matter, will not be enough to derail an economic engine that capitalizes on raw materials, a deep labor pool, and a transportation network that is second to none.

ò

Greater Houston Port Bureau | 5

Vessel Arrests

Securing Rights Against a Vessel or Maritime Property and Relief Therefrom Galloway Johnson “A ship may be here today and gone tomorrow, not to return for an indefinite period, perhaps never. Assets of its owner…within the jurisdiction today, may be transferred elsewhere or paid off tomorrow,” according to Polar Shipping Ltd. v. Oriental Shipping Corp., 680 F.2d 627, 637 (9th Cir. 1982). Such is the problem that may face anyone entertaining any form of business within the maritime industry.

As with most industries, contracts and business relationships often cross state and international borders. However, maritime law provides several unique remedies for protecting rights and enforcing obligations that arise through maritime dealings: vessel arrests and maritime attachments. Both are very powerful and relatively quick means of gaining leverage to enforce claims arising under maritime law. This article provides an overview of both and options for relief when facing a vessel arrest or maritime attachment.

When a claimant has an interest against a vessel owner or a vessel, they may choose to enforce those claims against not only the vessel owner but also the vessel itself. (See Federal Rules of Civil Procedure (Supplemental Rules for Certain Admiralty and Maritime Claims, Rule B)). A “maritime arrest” is the procedure for enforcing a claim or maritime lien against the vessel, otherwise known as in rem, which is Latin meaning “against the thing.”

Arresting a vessel is similar to arresting a person. It places the vessel under the control of the U.S. District Court that issues the Warrant of Arrest.

Once arrested, the vessel cannot be moved, cargo cannot be loaded or unloaded, and

6 | April 2015

Photo by Lou Vest

the vessel cannot leave port without a court order permitting it to do such things or vacating the arrest.

A number of rights arising under maritime law can support an order to arrest a vessel. Claims for seaman’s wages, claims based on collisions or allisions, claims for salvage, and claims for providing “necessaries” (i.e., repairs or services) to a vessel can all provide a basis for arresting a vessel. Since vessels are capable of easily leaving the jurisdiction of the court, arresting a vessel is a very powerful, and relatively quick, way to compel vessel owners to answer for claims against them.

If a claimant believes it may have a claim against a vessel owner, it should first contact an attorney well-versed in assessing and bringing claims to arrest a vessel as the law is quite nuanced. The claimant should be prepared to support its claims with documentation such as invoices, bills of lading, or contracts, and will likely be asked to provide affidavits (i.e., signed and sworn

www.txgulf.org

statements) from key personnel. Armed with such evidence, the claimant, by and through its attorney, will file a “Complaint in Limitation” (sometimes called a “Petition for Limitation”) in the admiralty court in whose jurisdiction the vessel is or will be located. The Complaint will name the vessel itself as the defendant in the case.

The court will determine if the Complaint is well-founded and whether the claimant has a bona fide right to arrest the vessel. This is determined by the court during an expedited hearing held at or near the time the Complaint is filed. If the court agrees that the arrest is warranted, it will issue an order and warrant to arrest the vessel. Importantly, the vessel owners may not even be made aware of the Complaint and potential risk of arrest until the vessel is actually arrested. This is usually preferable to claimants because it prevents the vessel owners from simply sailing to another port outside of the court’s jurisdiction. However, seasoned maritime attorneys have means to

Greater Houston Port Bureau | 7

vessel arrests monitor when a Complaint is filed and alert the vessel before the arrest is made.

If the court grants the order and issues a Warrant of Arrest, then the claimant must take the order and warrant to the U.S. Marshals office, along with a copy of the Complaint and supporting documents. The claimant must have sufficient knowledge of the vessel’s location so that the U.S. Marshals can locate the vessel and the claimant will need to post a bond, the amount of which varies by jurisdiction.

Assuming all of the foregoing is achieved, then the U.S. Marshal will board the vessel, serve the vessel’s master with a copy of all court documents, and post a copy of the Warrant of Arrest in the pilothouse and on the gangway. At that point, the vessel is “under arrest” and will be prohibited from nearly all activity without permission from the court.

Notably, most maritime nations have similar remedies and procedures for arresting a vessel to enforce a right against the subject vessel and/or the vessel owners.

Of course, the details of the process will vary from country to country, and local maritime counsel should be consulted in each country where the claimant wishes to consider arrest.

After a vessel has been arrested, the vessel owners, or anyone claiming to have an ownership interest in the vessel, should make an appearance to the court via “answering” the Complaint or making a “limited appearance.” Any person or entity appearing for the vessel has a right to a prompt hearing to challenge the vessel arrest. At the hearing, the claimant who sought and procured the arrest will have the burden to show why the arrest should not be vacated. In other words, the claimant will need to prove that their claim is likely to succeed against the vessel.

Again, documentation will be critical to proving the existence of the claim against the vessel, but the burden on the claimant is not as high as proving their ultimate right to recovery at trial. The claimant should

8 | April 2015

be prepared to present witnesses who will be subject to cross-examination by the vessel owner or, presumably, its counsel.

Following the hearing to vacate the arrest, the court will either grant the request to vacate the arrest or deny it. If denied, the arrest will remain and the claimant secures further leverage for obtaining non-court ordered satisfaction on its claim.

Even if the court refuses to vacate the arrest, the vessel owner may still get the vessel released from arrest by either posting a bond, entering into a “Letter of Undertaking” with the claimant, or providing some other form of security. If a vessel is arrested, vessel owners should immediately put their insurer (typically the Protection and Indemnity (P&I) Club) on notice of the arrest. If the court denies the vessel owner’s request to vacate the arrest, then the vessel owner’s insurer may agree to enter into a Letter of Undertaking with the claimant whereby the claimant agrees to release the vessel from arrest as long as the vessel owner agrees to submit to the jurisdiction of the court that issued the Warrant of Arrest and to pay the judgment ordered by the court or any sum negotiated and agreed to between the parties.

A savvy claimant will require that the Letter of Undertaking fully cover their entire potential claim before agreeing to release the vessel. Once a Letter of Undertaking is agreed to and executed by the parties, the vessel is permitted to carry on all operations as if the arrest never occurred (and thus earn revenues that could potentially be used to pay the claim). The Letter of Undertaking stands as security for the claim in place of the arrested vessel.

Alternatively, the vessel owners and the claimant may enter into any other security agreement which otherwise secures the claimant’s claim, thus allowing the claimant to release the vessel. Such alternatives include cash deposits with the court, bank guarantees, and surety bonds.

The amount of security needed to release the vessel varies on the circumstances

www.txgulf.org

but is usually approximately 150% of the claim’s value. Of note, a vessel owner who feels that the vessel arrest was wrongful may bring a claim for Wrongful Arrest against the claimant. Thus, it is critical to assess the strengths, weaknesses, and cost concerns when considering arresting a vessel.

Another option for securing a maritime claim is to assert a maritime lien against either the vessel or other maritime assets.

(See Federal Rules of Civil Procedure (Supplemental Rules for Certain Admiralty and Maritime Claims, Rule C)). Claimants may be protected by operation of asserting a maritime lien and obtaining a maritime attachment against the vessel’s cargo or other maritime property. Under the process of maritime attachment, when a maritime defendant cannot be found or served with enforceable legal process to bring the defendant into court but the defendant’s maritime property exists within the court’s jurisdiction, the court may permit the claimant to obtain a Warrant of Attachment against any of the defendant’s property that may be found within the geographical jurisdiction of the court.

The attachment arises from a recognized maritime lien. Depending on the type of lien, a maritime lien may attach to a vessel’s electronics, furniture, boats, fishing gear, certain types of fishing rights and permits, machinery, spare parts, fuel and other equipment, cargo, fish, property that has been salvaged from navigable waters, and even the vessel itself as an alternative to arresting the vessel. Importantly, because the purpose of maritime attachment is to ensure jurisdiction and security for a maritime claim, the property being attached does not necessarily need to relate to the type of claim. In other words, a claimant may arrest cargo or other maritime property that is unrelated to the claimant’s claims.

The process for obtaining and executing a Warrant of Attachment against cargo or maritime property is

vessel arrests very similar to the process for arresting the vessel itself. Once the cargo or other maritime property is attached by the U.S. Marshals, it is put under the control of the U.S. District Court that issued the Warrant of Attachment and the property cannot be taken outside of the district, sold, moved, operated, or used without a court order permitting the defendant property owner to take such actions.

As with vessel arrests, Warrants of Attachment are often obtained and executed without the defendant property owner even knowing about them until they are executed and the property has been attached. In response, the defendant property owner is entitled to a prompt hearing to challenge the attachment. If the court denies the request to vacate the attachment, the claimant and defendant may agree to any other form of security

to secure the claimant’s claim in lieu of the attachments.

As one might imagine, the implications of arresting a vessel or attaching cargo or other maritime property can be far-reaching and are an undoubtedly powerful tool for obtaining satisfaction on a claim arising under maritime law. However, this article provides merely an overview of some of the available options and procedures. If considering arresting a vessel or attaching cargo or maritime property, claimants should consult with counsel experienced with this area of law to thoroughly consider all options and potential risks.

Disclaimer This article is provided for informational purposes only and does not constitute legal advice. The information cited herein is intended, but not promised or guaranteed, to be current, complete, or

up-to-date and should in no way be taken as an indication of future results. This article is offered only for general informational and educational purposes. It is not offered as and does not constitute legal advice or legal opinions. You should not act or rely on any information contained in this article without first seeking the advice of an attorney.

Authors Galloway Johnson Tompkins Burr and Smith is a full-service maritime law firm with over 25 years specializing in maritime law. The firm has over ten locations along the Gulf Coast to serve all manner of client needs. The authors are: Thomas J. Smith – Shareholder, Houston and New Orleans Frederick Swaim – Director, New Orleans Shannon L. Snider – Associate, Houston www.gallowayjohnson.com

ò

Across the Gulf Coast, we’ve been meeting the needs of our clients for 123 years.

With the Port of Houston expanding, do you have a bank that will grow with your financial needs?

With over 9 billion in assets, Trustmark offers expertise in the areas of Trade Finance, Maritime lending as well as a wide range of products and services tailored to meet your financial needs.

For more information on how Trustmark can assist you, please contact one of our experienced lenders.

Mike Quiray Senior Vice President, Trade Services & Maritime Finance 713.827.3707 MQuiray@trustmark.com

Jeff Deutsch Senior Vice President, Corporate Banking Manager 713.827.3717 JDeutsch@trustmark.com

trustmark.com

Member FDIC

Greater Houston Port Bureau | 9

Refinery Strike

Refinery Strike Update Emily Mitchell, GHPB On February 1, 2015, members of the United Steelworkers union (USW) walked out of nine U.S. refineries and chemical plants, a work stoppage that would eventually spread to a total of 15 facilities over the next six weeks. By February 26, over 6,500 workers were on strike at refineries and plants owned by Royal Dutch Shell, Marathon Petroleum, LyondellBasell, Tesoro, BP, and Motiva, including 12 refineries that account for approximately 20% of total U.S. refinery capacity. While the union and the companies reached a tentative agreement in early March, the more than month-long strike was a major event in the Houston area and the first such nationwide refinery strike since 1980.

Background Negotiations for a new three-year contract began on January 21, 2015, with the union seeking concessions on wage increases, safety conditions, and staffing issues. A national contract serves as a baseline for local deals and covers approximately 30,000 union members at over 230 facilities in the United States, including refineries, oil terminals, chemical plants, and pipelines. USW represents 5,000 workers in the Houston area alone.

Shell serves as the lead in the National Oil Bargaining talks, representing the oil companies’ interests in their negotiations with the USW. The national-level talks focus on settling a pattern for wages, benefits, and working conditions, and then local union and unit negotiations hash out the details at individual facilities.

As the nationwide strike went from nine to 11 and then to 15 facilities, union members continued to work as usual at other locations under what are known as rolling 24-hour contract extensions – existing contracts are extended one day at a time until a final agreement is approved or one side decides to terminate the extensions.

All but one of the facilities affected by the strike have been able to keep the plants running with limited impact on production.

Early on in the strike, Tesoro chose to shut down its refinery in Martinez, California, which was already partially shuttered due to seasonal maintenance.

The last time the U.S. saw a largescale, nationwide refinery strike was in 1980, which lasted for three months and also had minimal effect on production levels. Since then, the USW has settled agreements with the 20-plus oil companies that negotiate as a group, covering 50,000 workers in 1984 and 30,000 today. The USW currently represents workers at 65 refineries that account for about two-thirds of U.S. refining capacity.

In contrast to other sectors of the U.S. economy in recent years, refinery workers’ wages have generally kept up with inflation over the past 10 years and, according to the Bureau of Labor Statistics, the average refinery worker earned almost $62,000 per year in 2013.

The Steelworkers’ View The union has argued that, while wage increases were part of the negotiations, the strike was never about money. Instead, it claims that the real issue is safety and the companies’ allegedly dangerous staffing practices, labeling the strike an “unfair labor practice work stoppage.” News outlets reported USW International Vice President Gary Beevers as saying that “this work stoppage is about onerous overtime, unsafe staffing levels, dangerous conditions…[and] the flagrant contracting out that impacts health and safety on the job.” He also alleged that there are “daily occurrences of fires, emissions, leaks and explosions.”

The USW has been asking for larger wage increases than were established in the previous contract, stronger policies related to worker fatigue and the conditions

10 | April 2015 www.txgulf.org

contributing to it, and less reliance on nonUSW contract workers for temporary and part-time maintenance work. Union leadership has claimed that staffing levels are not sufficient to run the plants safely and that companies routinely bypass industry standards to keep workers on the job more days in a row than they can manage.

The Companies’ View Shell, on behalf of the oil companies, has come out strongly against the USW’s claims regarding safety and staffing issues, saying in a statement that “one of the issues on the table is the company’s fundamental right to staff operations according to business needs.” Instead, Shell has insisted that it needs flexibility in its hiring and staffing practices in order to protect the company’s core workforce in the long term.

As of February 27, Shell had made seven separate offers to the USW, all of which were rejected by the union.

According to Shell, the key issue has not been safety, worker fatigue, wages, or healthcare, but the USW’s demand that companies replace contractors with USW-represented employees – a demand that Shell deemed unreasonable. During the negotiations, Shell offered to jointly discuss opportunities related to craft employee recruitment, staffing for routine maintenance, and a workload balance assessment with an annual review of local practices related to scheduling.

The Contractor Issue Over the course of the strike, it became clear through public statements from both sides that the use of contractors was one of the primary sticking points in the negotiations. This appears to be something new in contract talks between the USW and the oil companies.

Years ago, the unions had a large amount of leverage in the refineries – if they called a strike, they could force the facilities to shut down entirely until the

Refinery Strike

dispute was settled. However, companies started hiring contractors in the 1950s while also updating the facilities with new technology, leading to an increasingly automated environment. Refineries now need fewer employees to keep plants running and can save money by using contractors for certain work. It also means that the USW cannot necessarily force a shutdown by walking out during contract negotiations.

In statements, Shell spokespersons have argued that using contractors allows companies to maintain flexible hiring practices, giving them the ability to retain workers only when needed during maintenance cycles and to more easily reduce the workforce during tough times.

Otherwise, Shell claims that there would be more permanent losses of union jobs.

The company also rejects USW claims that contractors lead to an unsafe working environment, saying that they all receive exactly the same training as USWrepresented employees.

The USW leadership, however, disputes these arguments. It claims that contractors are not as well trained as union members, are not familiar enough with the facilities and their systems, and, therefore, cannot protect themselves or their fellow workers. The USW points to recent accidents, such as the 2005 Texas City refinery explosion that killed 15 contract workers, as examples.

On the whole, however, the rate of injuries in the refining industry is lower than in other sectors, according to the Bureau of Labor Statistics.

Effects on Production Despite the strike, the affected plants have been able to keep running at nearnormal levels using automated processes, non-union managers, former employees, current employees from other locations, and contract workers. While 11 of the refineries have a production capacity of approximately 2 million barrels per day, analysts estimated that output at those facilities was reduced by only 200,000 barrels per day during the work stoppage – a mere 1% of daily U.S. consumption.

While the oil companies can keep the facilities running during the strike, there are other factors to consider. They typically have to pay higher rates to less-experienced workers filling in while the USW members are on strike and move workers from

longer-term infrastructure projects to fulfill day-to-day operations, risking delays on those other projects. Operationally, though, refiners are in a generally strong position to wait out the strike.

Greater Houston Port Bureau | 11

Refinery Strike Outcome of the Negotiations On March 12, Shell and the USW tentatively agreed to a new four-year labor contract. While the national agreement covers a review of staffing and workload levels, annual wage increases, health benefits, worker fatigue, and use of

contractors, it must first be approved by the union’s international policy committee and the local union leading negotiations before being voted on by the membership.

Even if approved by the membership, the tentative agreement serves as a framework and individual contracts must

be worked out at specific facilities. As of March 20, those talks were ongoing and yielding positive results, with most employees expected to be back on the job by the end of March.

ò

Plants Affected by Steelworkers’ Strike

1. LyondellBasell Refinery - Houston, Texas

8. TesoroMartinez Refinery - Martinez, California

2. Marathon Galveston Bay Refinery - Texas City, 9. Tesoro Carson Refinery - Carson, California Texas 10. BP Refinery - Whiting, Indiana 3. Marathon Houston Green Cogeneration - Texas 11. BP, Husky Energy Refinery - Toledo, Ohio City, Texas 12. Motiva Enterprises Port Arthur Refinery - Port 4. Marathon Refinery - Catlettsburg, Kentucky Arthur, Texas 5. Shell Deer Park Refinery - Deer Park, Texas 13. Motiva Enterprises Refinery - Convent, Louisiana 6. Shell Deer Park Chemical Plant - Deer Park, Texas

14. Motiva Enterprises Refinery - Norco, Louisiana

7. Tesoro Anacortes Refinery - Anacortes, Washington

15. Shell Norco Chemical Plant - Norco, Louisiana

12 | April 2015 www.txgulf.org

Greater Houston Port Bureau | 13

BARGING AHEAD ever so politely.

B

Buffalo Marine Service, Inc.

14 | April 2015 www.txgulf.org

www.BuffaloMarine.com

2015 Commerce Club Luncheons April 9, 2015

VADM C.D. Michel, USCG Deputy Commandant for Operations, USCG Headquarters, Washington, D.C. Vice Admiral Charles Michel is the U.S. Coast Guard Deputy Commandant for Operations, responsible for establishing and providing operational strategy, policy, guidance, and resources to meet national priorities for U.S. Coast Guard missions, programs, and services.

His previous flag officer assignments include Deputy Commander, U.S. Coast Guard Atlantic Area; Director, Joint Interagency Task Force South; Military Advisor to the Secretary of Homeland Security; and Director for Governmental and Public Affairs, U.S. Coast Guard.

A native of Brandon, Florida, he graduated from the U.S. Coast Guard Academy with a Bachelor of Science degree in Marine Engineering (with high honors) in 1985. In 1992, he graduated summa cum laude from the University of Miami School of Law as the salutatorian, receiving membership in the Order of the Coif.

Vice Admiral Michel’s awards include the Defense Superior Service Medal, the Legion of Merit, the Meritorious Service Medal, the Coast Guard Commendation Medal, the Coast Guard Achievement Medal, and the Coast Guard Letter of Commendation Ribbon. Vice Admiral Michel was also awarded the Distinguished Service Medal of the Colombian Navy. Vice Admiral Michel was the American Bar Association Young Lawyer of the Year for the Coast Guard in 1995, the Judge Advocate’s Association Career Armed Services Attorney of the Year for the Coast Guard in 2000, and is currently a member of the Florida Bar.

Current Sponsors:

Upcoming Luncheons: May 14, 2015...................................Capt. Tim Downs, General Manager, Shipping & Maritime,

Americas, Shell Trading (US) Company Current Sponsors: Buffalo Marine Service, Houston Fuel Oil Terminal, Houston Pilots, Port of Houston Authority, Richardson Companies, Shell Trading (US) Company, Targa Resources, West Gulf Maritime Association

June 11, 2015.......................................................Jennifer Carpenter, Executive Vice President,

American Waterways Operators (AWO) Current Sponsors: Buffalo Marine Service, Houston Pilots, Port of Houston Authority, Richardson Companies, West Gulf Maritime Association

The Commerce Club Luncheon Series by the Greater Houston Port Bureau brings together Houston-area maritime professionals to network and to learn from regional and national speakers. Join us every second Thursday from 11:30 am to 1:00 pm at Brady’s Landing in Houston. Advanced individual tickets are $30 for members or $40 for nonmembers ($5 surcharge for seats paid at the door). Sponsorship tables of 8 are available for $750. To register, please call 713-678-4300 or email cgomez@txgulf.org.

Commerce Club Luncheons held at: Brady’s Landing 8505 Cypress Street Houston, TX 77012 713-923-9489

Greater Houston Port Bureau 713-648-4300 info@txgulf.org www.txgulf.org

VCrude Oil by rail

Crude Oil By Rail: What Goes Around Comes Around Dave Cooley, GHPB We live in a nation that runs on oil.

Oil is used to drive machinery, provide space heating, and fuel human mobility.

Today, moving oil around the country from the wellhead to refineries, and from the refineries to various markets, utilizes all modes of transport: pipelines, ocean tankers, river barges, trucks, and rail.

Beginning with the discovery of oil in the U.S. by Colonel Edwin Drake at Oil City, Pennsylvania, in 1859, rail was one of the more prominent modes of early transport.

Although the preeminence of rail was short-lived as pipeline development eventually offered a more efficient and economically attractive delivery system, transporting crude oil via rail is once again in vogue.

Evolution of the Rail Tank Car In the 1860s, oil production in northwestern Pennsylvania grew from about 5,000 barrels a day to over 14,000 barrels a day by the end of the decade. As oil production expanded, horse and wagon transport, as well as movement by barge through Oil Creek to the Allegheny River, grew increasingly chaotic. The first rail line into the Oil City area was laid in 1862 and, in 1865, Amos and James Densmore designed the Densmore tank car that could carry a total of 80 to 90 barrels of crude oil. The construction consisted of two vertical tanks made of pine, banded with iron, and positioned on a flat car. (See Figure 1) In 1869, the tank car design evolved into the forerunner of today’s modern rail tank car with a cylindrical iron tank riveted to a flat car. This structure increased capacity to about 100 barrels, provided an enclosed container, and, being made

Figure 1 - Wooden Tank Cars (Wikipedia Commons)

Figure 2 - Union Tank Car Company (SMU Central University Library)

Figure 3 - Modern Tank Car (Wikipedia Commons)

16 | April 2015 www.txgulf.org

Crude oil by rail of iron, proved to be much sturdier. (See Figure 2) Today’s rail tank car, the DOT 111, is an unpressurized, circular tank with elliptical-formed heads set convex outward, a minimum plate thickness of 7/16”, and a maximum capacity of 34,500 U.S. gallons.

Construction can utilize carbon steel, aluminum alloy, or a high alloy steel. The tank car is roughly 68 feet in length and it is designed so that the maximum weight on rail is limited to 286,000 pounds, in accordance with federal regulations (See Figure 3). Prior to the recent surge in shale oil production, rail transport of oil was primarily focused on moving a variety of refined products, intermediate chemical feedstock, and chemical products.

The recent rise in the movement of crude oil by rail and the unfortunate occurrence of several high profile accidents prompted the U.S. Department of Transportation (DOT) on July 23, 2014, to introduce a comprehensive rulemaking proposal to improve the safety of transporting large quantities of flammable materials by rail, particularly crude oil and ethanol. The rule proposes several alternatives for enhancing the standards for the construction of rail tank cars, including thicker tank walls, electronically controlled pneumatic brakes, and rollover protection, as well as characterizing any train carrying more than 20 rail tank carloads of flammable liquids, including crude oil and ethanol, as a “high hazard flammable train.” The proposed effective date for implementation of this proposed final rule is October 1, 2015.

Increased Oil Production In the U.S., oil production has grown from 5 million barrels a day in 2007 to about 8.6 million barrels a day in 2014, an increase of approximately 80%. Most of this increase is associated with three dominant shale plays: the Permian Basin and Eagle Ford Formation in Texas and the Bakken Formation in North Dakota.

(See Table 1)

Table 1 Increased Shale Oil Production 2007 - 2014 Geologic Reference

Million Barrels Daily Permian 1.0 Eagle Ford 1.6 Bakken 1.1 Data from EIA and Department of Energy The vast majority of the additional production from the Permian Basin is transported via pipeline to the refinery complexes along the upper Texas Coast, including Freeport, Texas City, and Houston. Production from Eagle Ford is moved by pipeline and barge to many different refineries located all along the Gulf Coast from Corpus Christi to New Orleans. Other logistical alternatives from either Houston or New Orleans for Eagle Ford crude oil include transshipment to ocean tankers for delivery to the U.S. East Coast or the east coast of Canada, and pipeline movement from the New Orleans area into the Midwest. Increased oil production from these two areas in Texas quickly displaced all high quality low-sulphur crude oil imports all along the Gulf Coast. With regard to the Bakken Formation, most of this production

is stranded both geographically and logistically, a situation that has become the cause célèbre for rail transport.

The Need for Rail As U.S. oil production continued to grow in recent years, and with exports of domestic crude oil heavily restricted, developing new markets for the rising shale oil production was essential. The refineries located along the Atlantic and Pacific Coasts that were not connected via pipeline and historically received supplies of crude oil through overseas tanker delivery offered the best opportunity. To serve this market without an established network of pipeline infrastructure and with a very low probability of building one quickly, oil producers had two basic options: shut in production or seek an alternative mode of transport. Since shutting down production is anathema to oil producers, the only alternative most readily available was rail.

Once they were willing to subsidize rail transport, any concern about uninterrupted oil production abated and the high quality shale oil quickly displaced essentially all imported foreign crude oils of similar quality on both the Atlantic and Pacific Coasts. The resurgence of rail was underway!

STB - Class 1 Railroads Crude Petroleum - MBD

1,200

1,000 800

600 400 200

0

2008

2009

2010

2011

2012

2013

2014 e

Figure 4 -GHPB Analysis of Surface Transportation Board Data

Greater Houston Port Bureau | 17

Crude Oil by rail This resurgence began in 2008 when rail moved about 19 Mbbl/day (thousands of barrels a day), or fewer than 9,000 rail tank cars of crude oil. In 2013, rail transported over 800 Mbbl/day (over 450,000 carloads), a figure that is expected to grow by an additional 100 to 200 Mbbl/ day in 2014. (See Figures 4 through 6) Train Service A train can be composed of an array of freight cars carrying a variety of products to different destinations along the train’s route. This service is described as “manifest” service, with each piece of cargo accompanied by a written ticket that describes the cargo, shipper, receiverconsignee, origin and destination, and perhaps the value of the commodity being shipped. A freight car may carry one or more pieces of cargo, each with a “manifest.” Amalgamating similarly laden freight cars into a train, usually organized in sections and connected in the order of destination, is referred to as a “manifest” train. As the train arrives at each section’s destination, those cars are disconnected and other cars or sections might be added for onward transport to destinations further along the route.

A unit train, on the other hand, is a train in which all freight cars carry the same commodity and are shipped from the same origin to the same destination without being split up or switched en route.

Depending on the terrain to be traveled, the

STB - Class 1 Railroads

Rail Carloads - Crude Petroleum 600,000 500,000 400,000 300,000

200,000 100,000 0

2008

2009

2010

2011

2012

2013

2014 e

Figure 5-GHPB Analysis of Surface Transportation Board Data

Rail Transport of Crude Oil

Rail Tank Carloads Percent of U.S. Crude Oil Production 600,000

14%

500,000

12% 10%

400,000

8%

300,000

6%

200,000

4%

100,000

2% 0%

0 2008

2009

2010

Rail Transport

2011

2012

2013

% U.S. Crude Oil Production

Figure 6-GHPB Analysis of EIA and U.S. Department of Energy Data

Figure 7 - A Unit Train (Photo by Roy Luck)

18 | April 2015 www.txgulf.org

2014 e

crude oil by rail length of a unit train is generally between 70 and 120 freight cars and is powered by multiple diesel locomotives.

For example, a unit train carrying crude oil that is composed of 90 rail tank cars is about 1.2 miles in length and would contain around 65,000 barrels of oil. (See Figures 7 and 8) Development of Crude by Rail Facilities Supporting this rise in rail utilization, significant capital is being invested towards building loading terminals located in all shale oil production areas, with a high concentration in the Bakken region in Figure 8 - Bakken Crude Oil Train (NPCA, Photo by Chris Boyer, Kestrel Aerial Services, Inc.) North Dakota. These major shale oil production zones that are being served by rail are generally located between the Appalachian and Rocky Mountain ranges and include the Williston Basin in North Dakota, the Permian Basin in West Texas, the Western Gulf Basin along the Texas Gulf Coast, and the Powder River, Denver, and Uinta Basins located in Colorado, Wyoming, and Utah.

Further capital investment is also evident along the coasts, where unloading facilities are being constructed along with trans-loading facilities at strategic locations throughout the country in order to facilitate rail-to-water intermodal movements. These facilities receive crude Rail Terminal Shale Oil Activity oil by rail and then deliver it to either barge Figure 9 - Crude Oil Rail Terminals & Shale Oil Production Areas (EIA Mapping) or tanker for onward transport. In addition to facilitating the delivery of shale oil, this newly constructed rail infrastructure can be utilized to accommodate the supply of N crude oil from other areas, such as Canada.

0 255 510 layer1:Sources: Esri, HERE, DeLorme, TomTom, Intermap, increment P Corp., (See Figure 9) The Bakken Formation Since the primary demand for crude oil transport by rail is from North Dakota, the quantity available for rail transport is the difference between North Dakota’s current total crude oil production of 1,200 Mbbl/day and the sum of the demand for internal use and the total for all other modes of export. Internal demand consists of the Tesoro refinery in Mandan, North Dakota, with a capacity of 71,000 barrels

m

THE HOUSTON PILOTS Silent Servants of Progress

www.houston-pilots.com

Greater Houston Port Bureau | 19

1, 020 Miles

Crude oil by rail per day. Other export options include several smaller pipelines moving crude oil to various neighboring states as well as an Enbridge pipeline running through North Dakota to Clearbrook, Minnesota. Since this line also interfaces with the mainline carrying Canadian crude oil, the entirety of the pipeline’s 210 Mbbl/day capacity is not necessarily available every day, thus restricting the movement of Bakken crude oil. Assuming total pipeline capacity and local refining demand of 300 Mbbl/ day, and given that North Dakota oil production for 2014 is estimated at 1,200 Mbbl/day, about 900 Mbbl/day remains available for rail transport.

The Market for Shale Oil With domestic crude oil exports restricted, the best market opportunities for U.S. shale oil producers involved displacing high quality low-sulphur crude oils delivered to U.S. refiners from abroad. Since the prices of these foreign waterborne crude oils are all related to the price of Brent Crude, and are significantly greater than the price of locally available crude oils that are priced relative to West Texas Intermediate, domestic oil producers captured this price advantage and utilized the flexibility of rail to deliver shale oil to those markets. Figure 10 (Previous Page) illustrates the growth of crude oil delivery by rail to different regions in the United States.

Rail delivery to domestic refineries accelerated between 2012 and 2014 as a rising number of rail terminal facilities serving both producers and refiners were completed during these years. In 2014, rail delivered 324 Mbbl/day to refineries located throughout the country, with 153 Mbbl/day delivered to refineries on the East Coast, 101 Mbbl/day to the West Coast, and 68 Mbbl/day to the Gulf Coast. Rail deliveries to the Gulf Coast were primarily to refineries located in the New Orleans area.

Economics of Crude Oil by Rail The actual cost of shipping crude oil by rail is difficult to determine as prices are the result of confidential negotiations between the shipper and the railroad. However,

one can determine the implied cost of rail transport through what it known as the noarbitrage condition. This equation states that the price of a good at point C must be the same whether it is shipped from point

At Gulf Winds, our business is always about

MORE THAN THE MOVE

By partnering with Gulf Winds, your dollar goes to more than just moving freight. Gulf Winds continually partners with ICM (International Cooperating Ministries) to build churches and orphanages all over the world. We believe our company’s mission shouldn’t just be reserved for office walls.

Our mission is to glorify God by providing world class logistics services through continual investment in our people, clients, community and the world we live in.

www.gwii.com | 866.238.4909 20 | April 2015 www.txgulf.org

BUILDING BRANCHES AND RE L ATIONSHIPS SINCE 18 68 .

We’ve opened an all-neW financial center in houston at 1001 BroadWay street, located at the corner of BroadWay and laWndale.

We’d love for you to stop by, say hello, and experience the expertise and attention that only Frost can provide. Of course, no matter where you are, we’re here with the technology and convenience you want and the service you deserve.

frostbank.com (713) 388-7751

MEMBER FDIC

Crude oil by rail

Receipts of Domestic Crude Oil Delivered to Refineries

By Rail Tank Car by Region of the County (' 000 Barrels)

120,000

100,000

West Coast

80,000

Rocky Mountain

60,000

Gulf Coast

40,000 Midwest 20,000

East Coast 0

Figure 10 - GHPB Analysis of EIA and U.S. Department of Energy Data A or point B. Therefore, knowing the price of a barrel of crude oil at point A and the price of that same barrel of crude oil at point C, the difference between the two is the implied cost of transportation.

For example, in order to determine the implied cost of rail transport from the Bakken Formation to Philadelphia, one can subtract the price of Bakken crude oil from the price of crude oil in Philadelphia (taken here to be the price of Brent Crude plus the foreign-flag freight cost from the North Sea). Utilizing average data from October 2014 through February 2015, the implied rail freight cost from the Bakken Formation to Philadelphia comes to about $21 per barrel.

The same method can be used to determine the implied cost of rail transport in other situations. While it does not achieve exactly the same numbers that have been published regarding the cost of transporting crude oil by rail, the

no-arbitrage condition does provide a suitable estimate of these costs.

Houston Looking to the Houston area, the existing refining and logistics systems that evolved over the last 90 years have resulted in robust logistical interconnectivity (pipeline, barge, tanker, and rail) that

22 | April 2015 www.txgulf.org

optimizes the delivery of crude oil necessary to supply the local refinery complex. In addition, the refineries located along the Houston Ship Channel can readily augment pipeline deliveries with waterborne oil supplies sourced from foreign countries. As this local transportation infrastructure has matured over the years, the rail transport

crude oil by rail component became primarily devoted to moving refined products, intermediate chemical feedstock, other chemicals, and LPGs to destinations throughout the country.

Houston, however, is not without the capacity to receive crude oil by rail.

The three Class 1 railroads that serve Houston, the BNSF, KCS, and UP, all have the capability to deliver crude oil via unit trains. Specifically, Houston can handle two inbound unit trains of 105 tank cars, or about 150 Mbbl per day with the inherent flexibility to inject the arriving crude oil into the local pipeline system, transfer it to barge for movement to local refineries, or transfer it to neighboring terminals for short-term storage.

Looking forward, plans are being developed to create opportunities to receive crude oil by rail and load it onto deep draft vessels for export to Canada or to overseas destinations, should those markets become available. When complete, the waterborne

opportunity would allow the loading of about 50,000 to 60,000 cargo tons each at two berths every 48 to 72 hours. Operating at this optimum level, about 20 ships per month could arrive at and depart from Houston.

Conclusion Crude oil by rail is currently experiencing a revival and the refiners located throughout the country, especially those on the three coasts, are benefiting from the flexibility provided by rail delivery. In addition, refiners are realizing benefits by accessing various grades of Canadian crude oil also delivered by rail. Therefore, while rail is the more costly mode of transport, it is offering the oil industry the capability to meet the needs of both oil producers and refiners by providing prompt and flexible delivery of domestic crude oil that otherwise would have been stranded.

ò

Port of Houston Authority

Houston: America’s Distribution Center www.portof houston.com/map

www.bladesintl.com LETTER OF CREDIT BROKERAGE ………………………………..…………………………………………………………………………………………………………………………..………...………

Diplomatically reduces export letter of credit and trade finance fees significantly.

Blades International, Inc. is the leader in Letter of

Builds relationships with the top strategic International Trade Finance Banks by allowing them to quote on Letter of Credit activity.

transactions”, helping various steel, energy

Reviews export letters of credit and provides expert advice on wording and credit issues.

Clients diplomatically enhance their relationships

CALL: Sherry Mama Direct: 281-224-3228

Credit brokerage for “Export letter of credit service, equipment, and commodity exporters arrange the most competitive trade finance terms. with the major International Trade Finance Banks and obtain the most competitive export letter of credit terms.

Contact: Sherry Mama | sherrymama@bladesintl.com | 2425 Fountain View, #350 | Houston, TX 77057 | 713.977.7400

spotlight

Spotlight on Manchester Terminal Emily Mitchell, GHPB On a section of land where the Houston Ship Channel and Sims Bayou come together sits Manchester Terminal, a privately-owned marine terminal with a fascinating 89-year history. Having collapsed from its former glory as a stateof-the-art cotton terminal in the 1920s to a derelict piece of property being sold off in bankruptcy in the 1980s, Manchester Terminal has since metamorphosed into a modern and innovative break bulk facility.

Serving over 20 ships every month, the terminal handles a wide variety of cargoes, including drill pipe, containers, metals, oilfield equipment, and more. As Vinny Pilegge, the current president of Manchester Terminal Corporation, says, “we handle everything that moves the world.”

The Birth of the Houston Ship Channel In the early twentieth century, cotton ruled the local economy, with Houston controlling around 20% of the total U.S. cotton business by 1905. Combined with other interests, such as the growing petroleum industry, local businessmen and entrepreneurs saw the need for a wider and deeper Buffalo Bayou in order for Houston to compete with Galveston and other ports.

By 1914, the new Houston Ship Channel was open, allowing for the movement of cotton and other goods from Houston to the rest of the world.

Dredging of the channel continued in the following decade and by 1925 had reached 30 feet, full deep water status. The cotton trade continued to flourish, leading to the creation of the Manchester Terminal Corporation in 1926. The terminal’s wharves and warehouses were specifically built to service this rapidly growing export business.

A Purpose-Built Cotton Facility In the mid-1920s, the Oklahoma Growers Association sent a team of people to Texas in order to secure opportunities for

Photo by L Frederick Hinojosa its cotton business and the Port of Houston guaranteed facilities for the storage and shipment of up to 400,000 bales of cotton for the 1927 season. As existing facilities could not handle such a large amount of cotton, a group of local investors saw an exciting opportunity and formed the Manchester Terminal Corporation. With the purchase of 72 acres of land at the cost of $5 million, the newly formed entity built over 1,500 feet of deep sea wharves and 1.25 million square feet of warehouse space capable of storing over 200,000 bales of cotton. At the time, the Houston Chronicle described the terminal as “a monument to industrial Houston” and lauded the vision of the local Houston businessmen who envisioned the continued development of the Houston Ship Channel.

The Manchester facility was, therefore, a product of the cotton trade, having been purposefully built for the storage and shipment of cotton for foreign and domestic markets. It included three rail tracks, with one leading directly onto the wharf area itself, and a two-story, reinforced concrete warehouse furnished with state-of-the-art

24 | April 2015 www.txgulf.org

fire control and conveyor movement systems. To support Manchester’s day-today compressing activities, the facility ran two steam-powered cotton compresses and a belt-driven material handling system that moved goods throughout the warehouse.

Raw cotton was unloaded from rail cars, compressed into bales, and then carried by an overhead track and rail system to be stacked until the cargo ship arrived to carry the cotton to its final destination.

In the 1930s, Houston became the world’s largest spot cotton market and, by the end of the decade, the Port of Houston was handling more cotton annually than any other port. Unfortunately, World War II brought the boom times to a sudden halt and cotton exports would never reach the same levels from before the war.

Manchester Terminal was not immune to the wrenching changes occurring in the local and global economies.

Oil is the New King During the war, refineries suddenly started popping up along the Houston Ship Channel, pushing out the cotton business.

Oil quickly cemented its place as the new

Photos Courtesy of Manchester Terminal and L Frederick Hinojosa

Greater Houston Port Bureau | 25

spotlight leader of the Houston economy and cotton production never fully recovered to its former glory. Manchester’s purpose-built facility was not set up for this dramatic shift and, as Manchester’s own history notes, “what was good for the cotton trade was not good enough for the oil and gas industry.” The terminal began to erode.

Manchester was also heavily affected by an industry turn away from cotton toward polyester as well as the introduction of standardized sea containers. Large specialized warehouses, like the one operated by Manchester, were increasingly obsolete in a world of containerization.

New technology, falling costs, and purposebuilt ships forced marine terminals to adapt quickly. Manchester attempted to diversify with other goods such as carbon black, lumber, oil drums, and general cargo.

Eventually, however, the company was unable to continue resisting the negative economic pressures. It was forced to seek out new owners.

Charter Oil Company, which owned and operated the adjacent refinery and tank farm, acquired Manchester Terminal in 1975 with the goal of razing the property and expanding its tank farm operations.

Charter ended up demolishing only the warehouse structures on the dock, allowing the terminal to handle larger cargo than before. Under Charter’s decade of ownership, the terminal shifted its focus to commodities and containers, leaving cotton behind.

A New Era, a New Identity Charter was beset by problems and was unable to fully turn the floundering facility around. The company filed for bankruptcy in 1984 and put its assets up for sale – including Manchester Terminal.

In 1985, the property caught the eye of local businessman Hub Finkelstein who outbid the Port of Houston and bought the terminal for more than $7 million. Despite Manchester being a dilapidated, nonfunctioning facility, and Finkelstein and his partners having no experience running a marine terminal, the new owners had a vision and eagerly set out to fulfill it.

In the late 1980s, what was left of Manchester Terminal was a mere shell of

what it had once been: the buildings and foundation were falling apart, the land was being taken over by vegetation and swamps, and acreage had diminished thanks to erosion from Sims Bayou. Before the new owners could do anything, they had to undertake extensive renovations of the terminal. With the complete renovation, the new management hoped at the time to evolve Manchester into a modern marine terminal and major industrial park.

In the 30 years since Manchester Terminal was salvaged from bankruptcy, millions of dollars have been invested to improve every aspect of the terminal, including the warehouses, infrastructure, offices, and roads. Thanks to these efforts, as well as the implementation of a Blueprint for Improvement Plan in 2006, its operations have expanded from two ships per month in 1985 to over 20 ships per month and up to 300 trucks per day now.

With the purchase in 1985, the goal was never to “pump and dump” the terminal; instead, Manchester has focused on constantly improving the facility to ensure that it maintains its vitality for another 100 years. As such, to the original facilities Manchester has added another 1,700 feet of dock (now totaling 3,200 feet), stabilized and paved approximately 25 acres of the property, updated the fire suppression system, and installed a Bridgestone fendering system. Manchester

26 | April 2015 www.txgulf.org

Terminal is also a designated foreign trade zone.

Manchester prides itself on being a state-of-the-art marine terminal that constantly raises the bar for the industry. It focuses on safety, security, and compliance while ensuring a safe and clean environment for the hundreds of cargo handlers working on the property. As the owner of the facility, Manchester is held accountable for the infrastructure, technology, security, and working conditions and, as a result of its extensive efforts in these areas, Manchester is fulfilling its goal of becoming the premier privately-owned break bulk terminal on the Houston Ship Channel. The company offers tours of its facilities and the United States Coast Guard has brought representatives from foreign nations into Manchester to show them how a marine terminal operates.

Manchester Terminal has come a long way from its origins as a cotton terminal in the 1920s, facing many detours throughout the almost century-long process. Under the current management, the terminal has found its purpose in today’s shipping industry and hopes to set an example for the rest of the industry for years to come.

As Vinny Pilegge says, “it was a great cotton facility in the 1920s and it lost its identity by the time we bought the facility in the 1980s. We want to preserve an identity now.” Ed. Note If you are interested in participating in a spotlight on you or your company, please contact Emily Mitchell at editor@txgulf.org.

ò

BE0005

SALES SERVICE RENTAL Forklifts, Terminal tractors, Railcar movers, scissor lifts and all lines of material handling equipment.

2014 #1

dealer in the world

8787 WALLISVILLE RD, HOUSTON, TX 77029 I (713) 672-1100 I briggsequipment.com

Sea & Shore

Ship & Store

www.odfjell.com

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.

The Greater Houston Port Bureau Presents

86th Annual Maritime Dinner

Honoring the 2015 Maritime Company of the Year

• Honored for significant contributions to Houston area education, communities, workforce development and industry expansion • Key supporter of 2014 Houston Ship Channel Centennial celebrations

Event Details Saturday, August 22, 2015 Reception, Dinner & Silent Auction 5:30 pm - Cocktails 7:00 pm - Dinner 8:00 pm - Presentation Bayou City Event Center 9401 Knight Road, Houston, Texas

For registration and information: (713) 678-4300 or dinnerinfo@txgulf.org Tables at the event are arranged in order of sponsorship level and registration date, so sign up soon for the best seats!

Greater Houston Port Bureau 111 East Loop North Houston, Texas 77029 dinnerinfo@txgulf.org (713) 678-4300

About the 86th Annual Maritime Dinner

• The Dinner welcomed 600 guests in 2014 • Advertising materials are distributed to over 7,000 maritime professionals per month during the eight-month campaign.

• Most guests are senior executives in maritime and energy related companies and high-level public officials.

• Proceeds go in part to supporting the Port Bureau’s maritime advocacy efforts.

About the Greater Houston Port Bureau • The Port Bureau is a 501 c(6) non-profit trade organization established in 1929 to support the Houston maritime community and currently represents over 190 member companies.

• The Port of Houston is the largest port in America by tonnage.

• The Port Bureau supports 4 core advocacy and community issues: harbor maintenance & dredging, port efficiency, maritime awareness & education, and maritime security.

Join Our Sponsors Today www.txgulf.org/annualdinner.php (713) 678-4300

Table Sponsorships

Current 2015 Maritime Dinner Sponsors Queen of the Fleet

Queen of the Fleet Sponsor $15,000

Media - Premium billing with logo on all print and electronic media, including: the Port Bureau News monthly magazine, website, email announcements, and event video On site - One table (10 seats) near the honoree, valet passes, premium billing in sponsor presentation, half page ad in auction catalog

Admiral

Charles Flournoy

Admiral Sponsor $5,000

Media - Logo on all print and electronic media, including: the Port Bureau News monthly magazine, website, email announcements, and event video On site - One table (10 seats), valet passes, premium billing in sponsor presentation, quarter page ad in auction catalog

Commodore Sponsor $3,000 Media - Company name on all print and electronic media, including: the Port Bureau News monthly magazine, website, email announcements and event video On site - One table (10 seats), valet passes, eighth page ad in auction catalog, logo in sponsor presentation

Captain Sponsor $2,500

Media - Company name on all print and electronic media, including: the Port Bureau News monthly magazine, website, email announcements, & event video On site - One table (10 seats), valet passes, logo in sponsor presentation

Event & Silent Auction Sponsorships All sponsorship levels include company name recognition based on contribution level in printed and electronic materials and signage near the sponsored auction item or event. Silent auction sponsorship levels can be achieved with in-kind or monetary donations. Event sponsorships are monetary donations.

Silent Auction Event Sponsorships Premier..........$2,000 Photos (1)........ $2,500 Platinum.........$1,000 Valet (1)..........$2,000 Gold................ $500 Bar (3)............ $1,500 Silver............... $250 Decor (10)..........$500 Bronze............. $100 Media (10)..........$500 Wine Pull......... Sold!!

In-Kind Wine Donations

Commodore BDP International Blades International Ceres Gulf Cooper/T. Smith Frost Bank Houston Fuel Oil Terminal Houston Mooring Co. Kinder Morgan KPI Bridge Oil

Manchester Terminal Moran Gulf Shipping Odfjell Schröder Marine Service Suderman & Young Towing Targa University of Houston Downtown College of Business Vopak

Captain

Amegy Bank Biehl & Co. Briggs & Veselka Brown & Gay Engineers Inc Danner’s Inc Excargo Services GAC Shipping Galloway Johnson Tompkins Burr & Smith Gardere Wnne Sewell Gulf Stream Marine

HDR, Inc. JPMorgan Chase Ports America Port of Galveston Port of Houston Authority Rickmers-Linie America San Jacinto College Shrader Engineering Watco Co. Greens Port West Gulf Maritime Association

Silent Auction

Premier

Gold

Annabeth & Mike Photography Stages Repertory Theatre

Silver

Becker Vineyards Dry Comal Creek Vineyards and Winery Innovative Images Manchester Terminal Peli Peli Sheraton Houston Brookhollow Todd Glass Art

Bar Sponsor

Bronze

University of Houston School of Theatre and Dance Nothing Bundt Cakes Amy’s Ice Cream Mark’s American Cuisine Tradicao Brazilian Steakhouse Boudreaux’s Cajun Kitchen The Houston Museum of Natural Science Flat Creek Estate

The Barkery Maida’s Belts & Buckles Athena Gun Club Cordua Restaurants Maximum Scuba Artisans Restaurant Children’s Museum of Houston EddieV’s Prime Seafood Tony Mandola’s Taste of Texas

Honoree Gift

Manchester Terminal

Wine Pull

Houston Mooring Co.

Joint Task Forces

DHS Establishes New Joint Task Forces To Protect Southern Border Emily Mitchell, GHPB In October 2014, Secretary of Homeland Security Jeh Johnson delivered a speech regarding United States border security. The focus of his policy announcement was the creation of three new Joint Task Forces as part of DHS’s department-wide Southern Border and Approaches Campaign Plan that Secretary Johnson first announced on May 8, 2014.

The Department of Homeland Security is dedicating itself to building a risk-based strategy for border security, which includes the Southern Border campaign and brings together the assets and personnel of U.S. Customs and Border Protection (CBP), the U.S. Coast Guard (USCG), U.S. Immigration and Customs Enforcement (ICE), U.S. Citizenship and Immigration Services (USCIS), and other DHS resources. Secretary Johnson assigned USCG Vice Admiral Charles Michel to lead a planning team in order to develop lines of effort, actions, and milestones to accomplish the program’s goals effectively and efficiently.

He also announced the creation of three Joint Task Forces to direct the agencies’ resources towards achieving the overarching goals of the Southern Border and Approaches Campaign. These goals include enforcing immigration laws, interdicting individuals attempting to illegally cross U.S. borders, degrading transnational criminal organizations, and decreasing the threat of terrorism, all without obstructing lawful trade, travel, and commerce.

According to Secretary Johnson, “these efforts…will enable more effective, more efficient, and more unified homeland security and border security efforts across our southern border and approaches.”

Following the secretary’s speech, he issued a memo on November 20 directing the agencies to implement the new border security policies, including the

commissioning of two geographicallybased Joint Task Forces and a functionallyfocused Joint Task Force. All three Joint Task Forces will integrate and incorporate the assets of USCG, CBP, ICE, and USCIS as needed. Secretary Johnson also directed the Joint Task Forces to adopt a supportedsupporting component model.

Joint Task Force East will be responsible for the southern maritime border and approaches and will be headed

by USCG Vice Admiral William “Dean” Lee, Commander of the Coast Guard’s Atlantic Area command. USCG will be the supported component.

Joint Task Force West will be responsible for the southern land border and the West Coast and will be headed

by Commander Robert Harris, the Chief Border Patrol Agent for the Laredo Sector and Commander of the South Texas Campaign. CBP will be the supported component.

Joint Task Force Investigations will focus on investigations in support of Joint Task Force East and Joint Task Force West and will be headed by David Marwell, Special Agent in Charge of the Homeland Security Investigations office in Dallas.

ICE will be the supported component.

Secretary Johnson’s November memo also outlines the ten objectives of the Southern Border and Approaches Strategy.

These objectives include: 1. Minimizing the risk of terrorism; 2. Increasing the perceived risk of engaging in or facilitating illegal transnational or cross-border activity; 3. Interdicting people and goods attempting to enter illegally between ports of entry; 4. Increasing situational awareness in the air, land, and sea border and approaches; 5. Decreasing or disrupting the profitability and finances of transnational

30 | April 2015 www.txgulf.org

criminal activities at the optimal points; 6. Dismantling criminal and terrorist organizations and networks; 7. Preventing the illegal exploitation of legal flows; 8. Maximizing the resiliency of key nodes, conveyances, pathways, and transportation infrastructure; 9. Minimizing the cost to travelers and delays to shippers in being screened and vetted at ports of entry; and 10.

Maximizing the number of travelers and value of imported goods that undergo screening before arriving at ports of entry.

The directors of the new Joint Task Forces will lead the efforts to enable more effective, efficient, and unified border security in order to achieve the objectives listed above.

According to Secretary Johnson, this country’s border patrol was virtually nonexistent prior to 1904, when President Teddy Roosevelt created the United States Immigration Service – a 75-man mounted force based in El Paso that was responsible for the entire 2,300-mile southwest border.

Since the creation of the U.S. Border Patrol in 1924, this service has grown into one of the U.S. government’s largest agencies with a budget of $3.5 billion and 23,000 total personnel. In FY 2014, 18,127 border patrol agents were dedicated to the southwest border alone, utilizing the latest in technology and equipment.

Thanks to these efforts, the estimated number of undocumented immigrants in the United States has dropped to 11.3 million from a high of 12.2 million in 2006. As such, apprehensions have fallen to approximately 400,000 per year, the lowest rate since the 1970s. As Secretary Johnson stated in his October speech, “it’s now much harder to cross our border and evade capture than it used to be – and people know that.”

ò

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

Port of Galveston

AN EFFICIENT PART OF YOUR SUPPLY CHAIN • Served by Wallenius Wilhelmsen • Roll-On / Roll-Off, Break Bulk and Project Logistics, ARC, "K" Line Ro-Ro, Höegh Cargo Terminals Autoliners, CSAV Ro-Ro & NYK Ro-Ro • Direct Connection to BNSF Railway and • 30 minutes to Open Sea Union Pacific Railroad • Efficient Labor and Competitive Rates • Immediate Access to the Interstate Highway • Foreign Trade Zone No. 36 System and Gulf Intracoastal Waterway

Roll-On / Roll-Off terminal - New vehicle imports

Imported wind turbine towers departing the port by rail

P.O. Box 328 • Galveston, TX 77553 Phone 409-766-6112 • Fax 409-766-6171 Website: www.portofgalveston.com Contact: Capt. John G. Peterlin III Sr. Director of Marketing & Administration Email: jpeterlin@portofgalveston.com

Greater Houston Port Bureau | 31

Terminal Management Training in Houston May 18-22, 2015

CPE

Hosted at the Greater Houston Port Bureau

17 modules over 5 days Take part in the 5 day executive training course that will enhance your management skills and give you and your organization a competitive edge

CERTIFIED PORT EXECUTIVE TM PROGRAM

For more information, contact registration@macdonnell.com or 902.425.3980

Visit our NEW website at: http://certifiedportexecutive.com

This training course provides a unique, holistic understanding of all types of marine terminal operations and will contribute to improving your commercial understanding of the business. Attending will help you improve your overall risk management skills, as well as provide insight into international best practices.

Furthermore, you will gain knowledge on how to how to manage stakeholder relations, both within your own company as well as external stakeholders, including regulators, environmental groups and local residents. Industry Knowledge Accelerated Learning Complex Content Adaptation Succession Planning Pro-Active HR Development

CPE

Photo Credit: Port of Houston Authority

Partners with the Greater Houston Port Bureau

Greater Houston Port Bureau | 33

Commerce Club

Commerce Club March 2015

Featuring COL. Richard P. Pannell, District Commander, Galveston District, U.S. Army Corps of Engineers Judith Schultz, GHPB On Thursday, March 12, 2015, local business leaders gathered at Brady’s Landing for the Port Bureau’s monthly Commerce Club luncheon. They welcomed COL. Richard P. Pannell, Commander of the U.S. Army Corps of Engineers (USACE) Galveston District, as he spoke about USACE priorities in regional port projects and supporting non-federal investment.

“The Texas Coast is a regional priority,” Pannell noted as he outlined USACE Galveston District’s ongoing projects and support in the coastal community. “We are in the process of implementing things we’ve never done before.”

Pannell specifically mentioned that improving navigation, sustaining federal projects, supporting non-federal investment, and protecting the coastal zone are the District’s specialized “lines of effort” in our region. His command’s priorities with regard to these lines of effort include deepening and widening the channels, ensuring the safety of the ports, implementing a Texas coast study examining increased protection from hurricanes, and facilitating necessary dredging and maintenance work.

Pannell went on to describe in more detail the process required to gain approval for third-party use of federal dredge material placement areas.

“It’s not just a permit,” he advised the attendees. “It’s a little more complicated.”

Applicants seeking approval to use a federal placement area must meet certain criteria, including an assurance of available

COL. Pannell addresses attendees at the March 12th Commerce Club luncheon capacity. They also must demonstrate that their use will not interfere with USACE operational and maintenance activities, show that it will not adversely impact the USACE placement project, and meet the three elements of the public interest determination.

The approval process can be lengthy and arduous, and Pannell encouraged those interested to utilize the new permit preapplication screening process. USACE staff members conduct a brief but thorough review of proposed projects and provide helpful information, including a summary of the data the Army Corps must consider in its decision-making process.

“The pre-application meeting can be the single most important event,” stressed Pannell. “It gets all the areas together.”

Once the regulatory permit is obtained, the application moves through

34 | April 2015 www.txgulf.org

the analysis and acceptance phase – replete with requirements from sediment sampling to studying short- and long-term impact – before obtaining approval from USACE headquarters. The Army Corps is working towards shifting approval authority from headquarters to the regional level in order to speed up the process.

“It will move receiving approval from 90 days or more to 60 or 30,” said Pannell.

Documentation is readily available on their website for detailed reading at www.swg. usace.army.mil/Missions/Navigation.aspx.

Ed. Note: The next Commerce Club luncheon will be held on Thursday, April 9, 2015, and will feature VADM C.D. Michel, USCG Deputy Commandant for Operations.

Individual seats and table sponsorships are available. Sign up by visiting www.txgulf.org/ commerceclub.php or calling 713-678-4300.

ò

Commerce club

Clockwise from top left: COL. Richard Pannell and Port Commissioner Dean Corgey; Tom Marian and GHPB Chairman Charles Flournoy; Bernt Netland and Neils Auland; Commerce Club Attendees

Thank you to our table sponsors

Greater Houston Port Bureau | 35

Greater Houston Port Bureau www.txgulf.org 111 East Loop North Houston, TX 77029 713-678-4300 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 non-profit 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 7,000 professionals in the Houston maritime community via U.S. mail and email. Advertising is available for members.

ŠLou Vest