Port Bureau February 2015
Greater Houston Port Bureau
News
The Cuba Effect: Houston Eyes Benefits of Easing Cuba Restrictions
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Port Bureau
News
Publisher/President CAPT Bill Diehl, USCG (Ret.), P.E. Editor Emily Mitchell Copy Editors Emily Mitchell Judith Schultz
12 Houston Eyes
Benefits of Easing Cuba Restictions 3 Captain’s Corner
The 84th Texas Legislature
4 Port Watch
A Strong Finish Carries the Year
6 Port Congestion
Congestion at West Coast Ports Provides Opportunities for Houston
24 Annual
Dinner Honoree Announcement
18 Spotlight on
Charles Flournoy, Chairman, GHPB 25 Dredging
“Substantially Complete” at Barbours Cut, Bayport to be Finished in 2015
26 Condensate
Commerce Department Issues New Guidelines Regarding Condensate Exports
30 Commerce Club
January 8, 2015, featuring Keith Meyer, President and CEO, LNG America
Art Director Kyle Beam Writers Emily Mitchell Christine Schlenker Judith Schultz Photographer Kyle Beam Port Bureau Staff Jeannie Angeli Dave Cooley Al Cusick Megan Essenmacher Cristina Gomez Janette Molina 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 For information about the Port Bureau News stories or advertising: Email: editor@txgulf.org
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Captain's Corner
The 84th Texas Legislature: What’s on the Chopping Block?
C
ooking shows are always on the television at my house. My wife loves them, but it is difficult for me to get excited watching the Ace of Cakes rolling out fondant. However, I realize great chefs bring a great deal of experience and well-honed skills to the kitchen, so every once in a while I can be lured into watching a few minutes of preparation, improvisation, and grilling. By the end, I am often surprised at how clever and effective these culinary professionals are at developing a unique product with a limited array of ingredients. This approach to problem solving got me thinking: What’s cooking at the state legislature in Austin with regard to our ports? With 25 new representatives and four new senators, we have a lot of new cooks in the kitchen up in Austin. During the election, we heard a lot of words like “conservative,” “small government,” and “austerity,” so it appears that Texas is going on a diet. My apprehension comes from not knowing whether we are going to be getting something healthy for our growth and development, or just a heaping helping of pork. Thinking about the challenges ahead, I am reminded of the old wives’ tale about how generations of cooks prepared pork roasts by slicing off the end, ostensibly to keep it tender. As it turned out, the real reason mom’s grandmother’s great-grandmother sliced off the end was that she had a short roasting pan. This is a valuable lesson from America’s heartland kitchens: know what you are cutting before making a dramatic slice. We need to get
that message to legislators as they sharpen their carving knives at the 84th Texas Legislature. Funding critical to the port region ensures progress on projects CAPT Bill Diehl, like the Highway 146 expansion USCG (Ret.) project, rail expansion at the Bayport Container Terminal, and the continual dredging work on the intracoastal waterway. We want to make sure that infrastructure development money is not cut from the state budget like pork that does not fit in the pan. Projects like this feed everyone on the channel as they help offer safe passage for motorists and trucks, alleviate rail congestion, and ensure growth at all HSC facilities. Unfortunately, state transportation funding is a bit like the federal Harbor Maintenance Trust Fund: everyone agrees that it needs to be well-maintained and supported, but, at crunch time, money tends to get siphoned off into other areas. Within Texas, there is a $4 billion gap between what we need to ensure the proper maintenance of our state’s transportation infrastructure and what is currently budgeted. The cooks at the Lone Star Pantry need to be selective with their ingredients, but they also must remember that infrastructure funding is one of the staples, not the garnish. Lawmakers need to consider the multi-modal system that includes our waterways and rail as we anticipate the demands of a 21st century port. I am asking all of you in the maritime community to help set the table for success by keeping lawmakers informed and asking the right questions. The more we ask our representatives why they are cutting something, the better our chances of getting the appropriate transportation infrastructure that fits the state wallet and moves our freight. ò
Bill and his son Michael with their carrot cake cupcakes Greater Houston Port Bureau | 3
© Christine Schlenker
PORT WATCH
A Strong Finish Carries the Year Tom Marian, Buffalo Marine Service
T
he last time many of us saw $1.50-a-gallon gasoline at the pump, a Texan lived in the White House, the dot.com hangover had abated, and the deepening and widening of the Houston Ship Channel was nearing completion. Indeed, optimism was in the air and the sails of commerce remained full until the Great Recession reared its head. So, shall we continue with the sanguinity with a review of December’s vessel numbers?
of the four ports racked up positive arrival numbers in 2014.
The leader of 2014 was the Port of Corpus Christi, tallying an 18% improvement over the previous year and aided by a 4% monthly climb. Not surprisingly, domestic crude dominated the trade picture as rail cars discharged hundreds of thousands of barrels of oil throughout the port. Meanwhile, the Port December saw a burst of of Freeport, which has not Texas Ports Deepdraft Vessel Arrivals activity as it ushered in the end Dec. 2014 Year-to-Date Percent Change seen a decrease in vessel of the year. Total vessel arrivals since July, BROWNSVILLE, -4.8% arrivals in 2014’s final days was 2014’s runnerCORPUS CHRISTI, 18.0% for the State of Texas were up with 12% more FREEPORT, 12.2% 9% above the previous vessels for the year GALVESTON, 6.8% month. Yet, the annualized and a respectable HOUSTON, 0.0% yield was a mere 1.4% more 7.5% monthly PORT LAVACA, -4.1% than 2013’s totals. Moreover, surge. Finally, Galveston’s double-digit SABINE, -5.5% those gains on a port-bymonthly rise of 11.5% ensured 2014 would TEXAS CITY, -10.5% port basis were not equitably end on a high note – 7% over 2013, to be GRAND TOTAL, 1.4% distributed as reflected by more precise. the fact that only three out 4 | February 2015
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port watch
Port of Houston Deepdraft Vessel Arrivals 3,000 2,500 2,000
Dec. 2014 vs. Dec. 2013 2014 Annual (Total: 8,338)
2013 Annual (Total: 8,335)
1,500 1,000 500 -
On the other side of the vessel arrival ledger, the Port of Texas City saw nearly 11% fewer vessels in 2014. December’s loss of 2% was the port’s fourth consecutive decline—yet another outgrowth of greater domestic crude production which has displaced foreign imports destined for the port’s refineries. Sabine’s fate was somewhat akin to that of Texas City, as reflected in a 5.5% wane in vessel calls. Given the extremely robust refinery infrastructure located in the environs of this port complex, this should come as no surprise. Incredibly, the year’s final month was 15% higher than the previous one. On the opposite end of the Texas shoreline, Brownsville also finished the year below 2013 with nearly 5% fewer vessel arrivals. Of note is the fact that Brownsville’s total vessel count was 13 less than the year before; however, its December monthly total was 12 greater than November’s. This resulted in an astounding monthly gain of 70.6%.
What happens when a particular port welcomes 58 more vessels from one month to the next? In Houston, not much in terms of the port’s annual performance. Thus, despite 8.6% more arrivals in December, the port broke even for the year. Technically, there was a miniscule gain, but three more vessel arrivals in 2014 out of a total of 8,338 do not really move the needle from the null point – or do they? If one surveys general cargo movements, it is of interest that this category is off by nearly 4% despite a monthly jolt of 29%. Nonetheless, in terms of tonnage, these vessels have delivered greater loads per vessel. The
same holds true for container ships in that 5% more of these vessels moored in the port for the month and the year but the number of containers offloaded in 2014 was well beyond that percentage-wise. Bulker arrivals were impressive in their own right, with a year-over-year jump of 24.5% in the wake of a 5% monthly fall. Car carrier traffic was relatively consistent in terms of raw numbers. Nevertheless, in spite of yearly totals that were off 6% and down by 10% over the last month, a greater number of imported vehicles passed through the port in 2014.
The Port of Houston’s energy picture along the waterfront had its ups and downs for the year. 2014’s tanker picture was an improvement over 2013’s by a slim 1.4%, with the final month of the year 5% above that of the previous month. LPG movements ended the year on a very strong note – up 24%. Unfortunately, this second-highest monthly total could not keep LPG vessel arrivals out of the red, and 2013 outperformed 2014 by roughly 4%. Chemical tankers also posted one of their best months of the year, translating to a 13% month-over-month gain. Yet it, too, was down for the year by 19%. Granted, 2013’s record year would have been very difficult to eclipse. On the ocean-going barge front, things were far rosier with 14% more units calling upon the port for the month and 7% for the year. This was also consistent with the brownwater numbers, given that a record number of tows passed through the Houston Ship Channel in December. Thus, despite plummeting oil prices during the final quarter of 2014, maritime commerce throughout the region finished strong. Does this suggest that we are in store for more of the same in 2015? It all depends. If softening global demand for energy becomes prolonged, the positive ripples in the economy from aggressive oil production could rebound as waves of economic malaise. Fortunately, at this juncture, there is enough momentum to maintain modest gains for the bulk of the year even if oil remains at $50 per barrel. That, of course, is good news to the gaspumping consumer but not the best of news for scores of companies fracking their way through west Texas. ò Greater Houston Port Bureau | 5
port congestion
Congestion at West Coast Ports Provide Opportunity for Houston
Photo Courtesy of Wikipedia
Above: Containers at the Port of Oakland sit for weeks and months at a time waiting to be shipped around the world.
Emily Mitchell, GHPB
W
ith months of congestion continuing to pile up on the West Coast, and the arrival of a federal mediator to help speed up contract negotiations in Los Angeles and Long Beach, businesses are searching for alternative shipping routes and methods to avoid delays and keep their products moving through the supply chain. A combination of factors has created an acute situation where the two busiest ports in the U.S., which handle over 40% of imports, are losing business to 6 | February 2015
ports further up the West Coast and even on the opposite side of the country. With anywhere from six to 18 vessels waiting at anchor every day outside Los Angeles/Long Beach since the cargo delays began in the middle of October, the Port of Houston is in a good position to divert some of that business to the Gulf Coast. Since the contract between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) ended in July
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port congestion 2014, dockworkers have been working without a contract while the two groups muddle through contentious negotiations. Union officials have denied repeated PMA claims of an orchestrated slowdown, though they admit that some workers may be acting on their own due to frustration with the negotiation process. But along with the contract complications, other factors have contributed in causing the gridlock on the West Coast. These include a shortage of truck chassis to haul cargo to warehouses resulting from shippers selling their chassis to third-party leasing companies, as well as record high import levels, rail delays, and the increasing use of massive container ships delivering larger cargo volumes at once. While management believes a contract settlement with the union will go far in easing the congestion and delays, it is not the only element that needs to be addressed.
to nine days, many shipments that would normally be cleared in a couple of days are now taking more than two weeks in many cases. Some companies have decided to bypass these ports altogether, and avoid large delay penalties, by diverting goods through other ports or paying a large premium for air shipment. For example, more coffee shipments are finding their way through Houston instead of Los Angeles/Long Beach, a route that, while more expensive, is more reliable in the current environment.
Congestion at West Coast ports does not discriminate and has affected businesses from the NBA to McDonald’s. Late last year, the Golden State Warriors were forced to provide fans with vouchers when shipments of player bobbleheads were delayed by several weeks, while two- to four-week delays of frozen Regardless of the cause or causes of the congestion, french fry shipments compelled Japanese McDonald’s businesses dealing in goods ranging from commodities locations to institute temporary fry rationing, according to food to clothing are facing prolonged delays that are to Business Insider. wreaking havoc throughout the supply chain. With the The longer the problem continues, the more average delay in Los Angeles/Long Beach reaching up companies will be looking for options other than the
Photo Courtesy of Wikipedia
Port of Long Beach, California, with thousands of containers waiting to be loaded on a ship. 8 | February 2015
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port congestion West Coast as they strive for more flexibility in their shipping strategies. Analysts and shipping companies expect these delays to have long-term effects on the industry, even after the congestion is alleviated. And while many businesses have no choice but to transit through Los Angeles/Long Beach due to infrastructure requirements, enough shippers will have the option to move their cargo through other ports, even at higher cost and longer transit times, to substantially change the industry if the current difficulties continue much longer. Companies have started building warehouses in other areas such as Houston, and manufacturers are building more plants in south Asian countries to be closer to the Suez Canal, through which they can send their shipments directly to the East Coast. Container traffic shows no signs of slowing down and will continue to rise at U.S. ports in 2015. Global
Port Tracker, which covers Los Angeles/Long Beach, Oakland, Seattle, Tacoma, New York/New Jersey, Hampton Roads, Charleston, Savannah, Port Everglades, Miami, and Houston, tracked total imports of 1.39 million TEUs through its covered ports in November 2014, which was up 3.5% from November 2013. January imports are forecast at 1.39 million TEUs and February at 1.3 million TEUs, both up from 2014. Moreover, not only is the number of containers increasing, but they are arriving on increasingly bigger vessels and, in many cases, overwhelming current capacity at the docks. Fewer ships may be calling on the ports, but the larger ships require more time and manpower to load and unload. Like the rest of the U.S., the Port of Houston is seeing higher volumes of containers moving through its port. Unlike Los Angeles/Long Beach, however, Houston itself is not experiencing a problem with congestion. The
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port congestion port has been implementing a variety of measures in order to stay out in front of industry developments and create efficiencies that will allow Houston to respond to rising container volumes regardless of the causes behind them. In addition to the dredging work at Barbours Cut and Bayport, and the addition of larger cranes capable of servicing bigger ships, the Port of Houston is participating in a formal program run by U.S. Customs and Border Protection (CBP) that allows shippers to reimburse CBP for additional staffing and overtime work. As part of the program, which is open to airports and border patrol along with seaports, shippers can request for gates to be opened after hours and then reimburse customs for the additional staffing. This allows for evening and weekend gate openings and a more efficient movement of cargo.
of today’s shipping industry and prevent the sort of congestion issues that have afflicted California in recent months. ò
While it is unknown how much, if any, of the West Coast traffic will be diverted through the Gulf Coast, the Port of Houston expects container volumes to continue to rise. By proactively implementing a diverse set of programs, and putting the container terminals in a strategic position to handle any volumes that may come through, the Port of Houston is signaling that it is prepared to meet the challenges 10 | February 2015
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Upcoming Luncheons: March 12, 2015.............................................................Mayor Annise Parker, City of Houston April 9, 2015.........................VADM C.D. Michel, USCG Deputy Commandant for Operations, USCG Headquarters, Washington, DC May 14, 2015...................................Capt. Tim Downs, General Manager, Shipping & Maritime, Americas, Shell Trading (US) Company 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.
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cuba embargo
Houston Eyes Benefits of Easing Cuba Restrictions
Photo Courtesy of Wikipedia
Emily Mitchell, GHPB
O
n December 17, 2014, President Barack Obama made a surprise announcement outlining substantial changes to U.S. policy towards Cuba, easing trade and travel restrictions and laying the groundwork towards normalizing diplomatic relations between the two countries. With some taking effect on January 16, 2015, the new rules maintain pressure on the Castro regime to improve human rights and establish a democratic system in Cuba while smoothing the flow of commerce and travel. The announcement was the culmination of talks between the U.S. and Cuba over a year and a half, with a final push by the Vatican. Although the embargo itself remains in place, the policy shift sets the stage for renewed debate over its efficacy and, as some hope, a path towards full repeal. If so, Houston stands to become one of the primary beneficiaries of improved relations with the island nation.
Charting a New Course on Cuba
A fact sheet published on the White House website details the multiple steps the Obama administration plans to take regarding Cuba. Primarily, the U.S. will establish an embassy in Cuba, ease travel for U.S. citizens under 12 general license categories, and allow U.S. citizens to import $400 worth of goods upon their return. Travel purely for tourist purposes continues to be prohibited, but travelers will no longer be required 12 | February 2015
to obtain a special license as long as they fall under one of the 12 authorized categories, which include family visits, official government business, public performances, humanitarian projects, and support for the Cuban people. There will also be substantial changes to financial restrictions, including increasing remittance limits to Cuba, allowing U.S. banks to open corresponding accounts at Cuban financial institutions, and allowing travelers to use U.S. credit and debit cards in Cuba. More goods will be authorized for export to Cuba, including construction materials for private residences, agricultural equipment for small farmers, and certain communications equipment and services to expand internet access on the island. Finally, the new regulations will allow third-party countries to trade in Cuba, end the prohibition on foreign vessels from entering the U.S. after engaging in humanitarian trade with Cuba, and require Secretary of State John Kerry to review the U.S. designation of Cuba as a state sponsor of terrorism. The White House fact sheet provides a more detailed summary of the changes, declaring that “it is clear that decades of U.S. isolation of Cuba have failed to accomplish our enduring objective of promoting the emergence of a democratic, prosperous, and stable Cuba.� The administration believes that easing restrictions will be more effective at empowering the Cuban people and
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cuba embargo creating economic opportunities for both the U.S. and and corn, and many U.S. companies have been involved Cuba. in agricultural transactions with Cuba. Those who support the embargo argue that the History of the Embargo Cuban regime has not met the conditions required for In February 1962, President John F. Kennedy lifting it. However, recent surveys show that over 50% enacted a full economic embargo against Cuba after of Americans, including Cuban-Americans, oppose the Fidel Castro overthrew the Batista government in 1959, embargo, favoring the resumption of diplomatic ties, became increasingly close to the Soviet Union, and ending the travel ban, and allowing trade between the started nationalizing U.S.-owned properties and raising two countries. Opponents of the embargo argue that it taxes on American imports. The events of 1961 and has failed in the stated goal of changing Cuba’s human 1962, including the Bay of Pigs Invasion and the Cuban rights situation and that it actually harms the Cuban Missile Crisis, led President Kennedy to expand what people more than the regime. They also point to the fact had previously been a ban on nearly all exports to Cuba that the U.S. maintains relations with other countries into a full embargo that included strict travel restrictions with similar human rights records, such as Saudi Arabia and a termination of diplomatic ties. and China. The United Nations General Assembly has While it was maintained through a series of approved 23 consecutive resolutions condemning the executive orders for most of its history, the embargo was U.S. embargo, with the vote in October 2014 falling 188 enshrined into law with the 1996 Helms-Burton Act. to 2, with only the U.S. and Israel voting in opposition The statute states that the embargo cannot be lifted and three small island nations abstaining. until Cuba holds free and fair elections and transitions Besides the failure to make any substantial changes to a democratic government that does not involve the in the human rights situation in Cuba, the embargo Castro family. It also calls for improvements in human has had significant economic implications for the U.S. rights, freedom of the press, and the release of political According to some studies, the U.S. loses as much as prisoners. The president can change some aspects of U.S. $1.2 billion every year the embargo remains in place policy towards Cuba through executive action, but only and ending it could create as many as 6,000 American an act of Congress can repeal it entirely. Changes to the jobs. Additionally, Cuba is home to substantial natural embargo over the years have allowed some exports of resources, with the third-largest nickel reserves in the medical supplies and agricultural products such as wheat world and its territorial waters holding up to 4.6 billion barrels of oil and 10 trillion feet of natural gas. Many
Photo Šhus-online.net
Photo ŠSami Keinanen
Greater Houston Port Bureau | 13
cuba embargo businesses, as well as the U.S. Chamber of Commerce, have been urging Congress to end the embargo so that American companies can take advantage of the extensive trade opportunities and resource development that would be made available without its restrictions.
year, Texas ports shipped $85 million in agricultural products to Cuba, including wheat, poultry, and corn. Only Louisiana did more business with the island in 2009, at $241 million. Since then, the amount of exports
Houston
Houston and the State of Texas are in a prime position to benefit from the Obama administration’s decision to ease sanctions on Cuban trade; however, in order to reap the full rewards, Congress will have to fully repeal the embargo. Even with the embargo in place, Bush Intercontinental Airport could soon see an increase in direct flights to Havana as airlines capitalize on the easing of travel restrictions and fly more routes between the U.S. and Cuba. If Congress relaxes restrictions on the ability of ships call on U.S. ports after calling on Cuba, Houston would likely be the goto U.S. port for shipping cargo to Cuba thanks to its location. Furthermore, Houston-based oil and gas companies would be the main businesses vying for the opportunity to help develop the possibly expansive oil and gas fields off Cuba’s coasts. In the mid-2000s, Texas was a leading exporter of goods to Cuba due to a partnership allowed under the Trade Sanctions Reform and Export Enhancement Act of 2000. Under the statute, U.S. companies are allowed to export a limited amount of goods to Cuba for profit and, in 2008, Texas ports moved $143 million in food and agricultural products bound for Cuba. The following 14 | February 2015
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the cuba effect
Greater Houston Port Bureau | 15
cuba embargo leaving Texas ports for Cuba has decreased substantially, though some analysts believe that the recently increased remittance limits will boost Cuban demand for Texas goods. The graph on the previous page shows the flow of exports through Houston-Galveston to Cuba over the past ten years. With a full repeal of the embargo, Gulf Coast ports such as Houston, Freeport, and Beaumont are ideally situated to take advantage of new export and import opportunities and just-in-time deliveries between the U.S. and Cuba. Many businesses in Texas support lifting the embargo, and, in 2001, Texas was the first U.S. state to pass a bipartisan resolution calling for Congress to ease trade sanctions against Cuba.
does not have access to credit, but even a full economic embargo has not prevented the U.S. from becoming one of Cuba’s largest trading partners. The new regulations announced by the White House are a first step towards improving relations between the two nations, establishing deeper economic ties, and opening up new opportunities for American industries. Businesses in Houston, the state of Texas, and the U.S. as a whole will be watching closely for Congress to take that final step towards ending the economic embargo of Cuba. ò
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Conclusion
According to the Observatory of Economic Complexity at MIT, the U.S. is currently the fourthlargest exporter of goods to Cuba, behind China, Spain, and Brazil, while it purchases practically nothing from Cuba in return. Cuba cannot buy everything it wants from the U.S., and it must pay in cash since the country
16 | February 2015
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spotlight
Spotlight on Charles Flournoy Chairman, GHPB Christine Schlenker, GHPB
C
harles Flournoy, Vice Chairman and Partner at Wortham Insurance and longtime Port Bureau board member, started his new term as chairman of the Greater Houston Port Bureau in January 2015.
Charles spent his childhood in Jasper, Texas, a small town in deep East Texas which he describes as “an idyllic place to grow up.” The entire community invested in teaching its youngsters to value morals and honesty, and Charles joked that “you learn really early on that you might as well tell the truth, because if you don’t, they’re going to catch you anyway.”
Charles’ father was a mechanical engineer, but much of his work crossed over into civil engineering. He owned a construction firm when Charles was young, and some of Charles’ earliest memories are of going to work with his father and learning how to use large equipment. When Charles was twelve years old, his father started working for a dredging company. Every summer from then until he finished college, Charles joined his father at various waterways in the Gulf of Mexico and worked on the dredges. Charles was usually responsible for setting up buoys or stakes marking the dredge sites or following behind the dredge taking soundings to ensure the depth was correct.
Charles Flournoy, Chairman, GHPB
between a bulldozer and a front end loader and a back hoe.” Wortham also supported a large dredging company at the time, and Charles’ experience made him a good candidate to manage that account, as well.
After only nine months working with Wortham, Charles, along with many other young men, received his draft notice from the U.S. Army. Wortham promised Charles that his job would be waiting for him after his service period ended. One month into basic training, Charles realized that he could not make a living wage as an enlisted soldier and he opted to enter Officer Candidate School for the Army. After completion of his After high school, Charles attended the University of stateside training, Charles was deployed to Korea as a Texas and graduated in 1968 with a degree in business. Signal Corps officer in 1969. Although Charles did not have experience in insurance Two years into his military service, the U.S. started or finance, Wortham Insurance saw the value of his scaling back its involvement in the Vietnam War. construction and dredging experience. Wortham was Charles’ general said he had “more first lieutenants than hiring for its marine division which supported builders’ he knew what to do with” and offered the lieutenants the risk for construction projects, tugs, barges, small craft option of staying in Korea as officers or returning to the such as yachts, and contractors’ equipment. As Charles U.S. with an honorable discharge. Although the pay for explained, “they realized that I could go out to meet combat officers was generous, Charles chose to return with clients and look at a schedule of construction home and pursue his career. Wortham Insurance kept equipment, and I would know what it was and I’d be its employment guarantee when Charles returned in able to talk to them about it…I knew the difference 18 | February 2015
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Spotlight November 1971, and Charles has been employed there ever since.
Charles has spent most of his long tenure at Wortham as an account executive in some capacity, operating as a broker between those who want to buy insurance and those who are in the business of selling insurance. By the early 1980s, Charles was managing Wortham’s marine division. In the mid-2000s, Charles started overseeing the marketing efforts of all of Wortham’s divisions, “bringing some order to the chaos.” Most of his current or recent accounts focus on large construction projects, “usually things with nine zeros behind them, like LNG liquefaction plants.” Charles added that “it’s been a great career for nearly 47 years.”
The Telex operator was in charge of transmitting the communications, but Charles admitted that, “eventually, I had to learn to send them myself because I never seemed to get them all done before the Telex operator went home.” Insurance premiums were calculated by hand in large spreadsheets, so calculators were a welcome advancement.
In quick succession, the firm adopted fax machines and then computers which, combined with email and mobile devices, fundamentally changed daily practices. The transition from verbal communication to written communication permitted substantial improvements in recordkeeping and instantaneous documentation, but also required more conscientious responses. With clients Over the course of four and a half decades of service, on six continents, the work day never stops for Charles Charles has witnessed – and helped implement – a flurry because, “no matter what time of day it is in Houston, of technologies that have impacted the way insurance somebody somewhere that I’m dealing with is working.” companies do business. In his early career, written At the heart of his work, Charles explained, “my job communications comprised a handful of dictated is to be a professional pessimist. I have to think about Telexes and mailed letters each day, and the bulk of what people need in the way of insurance, or what can each day was spent speaking with clients on the phone. go wrong at the firm. I have to try to plan for all these
BARGING AHEAD ever so politely.
B
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www.BuffaloMarine.com
Greater Houston Port Bureau | 19
spotlight things.” This approach proved vital to the firm in the wake of Hurricane Ike in 2008. While many HoustonGalveston area businesses did not fully understand the preparation needed to maintain operations post-disaster until after Ike hit, Charles had taken his cues from an insurance firm with offices in the World Trade Center that were destroyed during the 9/11 attacks. With a business continuity plan revolving around complete electronic file backup, the firm had lost no data, communications, or files. Always planning for worst case scenarios, Charles put his IT team up to the challenge of positioning Wortham to effectively recover from a similar situation.
the company’s offices, and a mobile command center to continue providing services if the office space were compromised. The mobile command center chosen for the task was a moving van-sized trailer with expansion panels to increase its floor space, built-in generators, air conditioning, satellite uplink capabilities, 46 workstations, and “the fanciest porta-potty you ever saw,” and was stored at the vendor’s site in College Station. The Wortham team took annual training trips to practice using the mobile command center and their replicated data and to test the equipment prior to hurricane season.
When weather models showed Houston in the direct path of Hurricane Ike, the Wortham team scheduled Charles and his staff settled on a four-tiered delivery of the mobile command center for the day approach: a document management system to provide after expected landfall and secured the offices to the consistent file naming conventions across the company, best of their abilities. Priceless art, such as portraits of electronic data backups to save all electronic or scanned founders Gus S. and John L. Wortham and a painting of communications and files, server replication to provide downtown Houston from the early 1900s, were removed rapid access to any of the backed up data at any of and stored safely offsite. After Ike roared through
20 | February 2015
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Spotlight underground reservoir they sit atop, will open in summer 2015.
Wortham Insurance’s Mobile Command Center after Hurricane Ike Galveston and Houston late Friday night, Charles and the business recovery team from Wortham met at their offices the next morning to assess the impact. Six floors of the building were heavily damaged, two of which proved to be a total loss. The mobile command center was delivered Sunday evening and set up in the parking lot next to the building. By 10 a.m. Monday morning, Wortham’s employees, many of whom did not have power at their own homes yet, were taking claims calls in a safe, comfortable, and air conditioned environment. After demonstrating the need and success of the mobile command center, Wortham purchased a second unit to be able to provide better contingency planning for all of their locations in Houston, Austin, Dallas, Fort Worth, and San Antonio. The Wortham team uses their own disaster recovery experience to help their clients pick business continuity plans, and “a number of CEOs from our clients came by and brought their IT people to learn” how to implement such a plan.
Following the Houston Ship Channel centennial in 2014, Wortham Insurance is celebrating its own 100th anniversary in 2015. The company, founded by John L. Wortham and his son Gus as a partnership in July 1915, retains its independent ownership structure by allowing employees to become part-owners of the firm. To show appreciation to Houston for bringing a century of success to the organization, Wortham made a significant contribution to the Buffalo Bayou Partnership to build the Wortham Insurance Visitor Center near Sabine Street as part of the major redevelopment along Allen Parkway. The Visitor Center and other park facilities, jointly dubbed “The Water Works” for the abandoned
Although this is Charles’ first term as chairman of the Port Bureau, he is no stranger to leading non-profit organizations. He is the current chair of Marine Insurance Seminars, Inc., which not only provides continuing education to legal and insurance professionals, but also contributes at least $100,000 per year in scholarships to students to study marine insurance and admiralty law. He is on the board and is former chair of the Houston and Texas chapters of the American Heart Association and is the current chair of the national chapter’s insurance committee. Charles is also a former president of the Propeller Club in Houston and serves on the board of the Houston Technology Center. ò
Port of Houston Authority
Houston: America’s Distribution Center www.portof houston.com/map
Greater Houston Port Bureau | 21
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 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 Sponsor
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 Platinum.........$1,000 Gold................ $500 Silver............... $250 Bronze............. $100
$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
Current 2015 Maritime Dinner Sponsors Queen of the Fleet
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
Photos............ $3,500 Valet..............$2,000 Bar................ $1,500 Decor................$500 Media...............$500 Wine Pull...........$250 In-Kind Wine Donations
Admiral
Charles Flournoy
Commodore
Blades International Moran Gulf Shipping Frost Bank SchrÜder Marine Houston Fuel Oil Terminal Suderman & Young Towing Houston Mooring Company Targa Kinder Morgan Vopak Manchester Terminal Amegy Bank Danner’s, Inc. HDR, Inc.
Captain
Port of Galveston Port of Houston Authority
annual dinner
ExxonMobil to be Honored at 86th Annual Maritime Dinner GHPB
T
he Greater Houston Port Bureau (“Port Bureau”) will recognize ExxonMobil’s exemplary contributions to the Port of Houston and the surrounding region at the Port Bureau’s 86th Annual Maritime Dinner on August 22, 2015, at the Bayou City Event Center.
“The Port Bureau Board of Directors selects a person or company that has made a lasting impact on the port region to honor at our dinner,” said CAPT Bill Diehl, USCG (Ret.), president of the Port Bureau. “ExxonMobil contributed significantly to the port region in 2013 and 2014 through community events, educational programs, and industry expansion, adding to its long history of driving economic activity along Houston’s waterfront and supporting the surrounding community. We are privileged to recognize ExxonMobil’s contributions at our maritime event.” Neil Chapman, president of ExxonMobil Chemical Company, welcomed ExxonMobil’s selection as the Port Bureau’s 2015 honoree by stating, “Like the local energy and chemical industries, the Houston Ship Channel is an engine of growth, delivering benefits to the Greater Houston area, the state of Texas, and the nation as a whole. ExxonMobil is proud to be a part of this vibrant business community.”
Community College Petrochemical Initiative, a consortium of nine member schools in the Texas Gulf region that recruit and train instrument technicians, welders, pipefitters, electricians, and other skilled workers. ExxonMobil’s commitment to encouraging students to pursue science, technology, engineering, and math (STEM) careers is demonstrated through the ExxonMobil Future Leaders Academy, started in 2013 to bring minority students from around the country to learn from and interview with top ExxonMobil executives in Houston; annual “Introduce a Girl to Engineering” activities to increase interest in STEM careers among girls, part of the Girl Day Initiative by DiscoverE; and $9.7 million in corporate and employee donations in 2014 to Texas colleges and universities to encourage STEM programs. ExxonMobil, together with its employees and retirees, also contributed more than $23 million to charitable organizations in the greater Houston area in 2013.
ExxonMobil has consistently invested in the Houston region’s economic growth, most recently by initiating construction of a new steam cracker in Baytown and new polyethylene facilities in nearby Mont Belvieu. The project will generate an estimated $870 million in additional regional economic activity on an annual basis, while creating thousands of construction and related ExxonMobil displayed its dedication to the jobs in surrounding Houston communities. When fully community in 2014 by providing financial support and operational, the new facilities will add 350 permanent volunteer hours to the 2014 Houston Ship Channel jobs at the Baytown complex. Centennial celebrations, honoring a century of hardThe Port Bureau’s Annual Maritime Dinner attracts working Texans and economic development along the 52-mile waterway. Celebration events included, more than 600 leaders from the maritime, energy, among others, an hour-long documentary, Houston petrochemical, and transportation industries. Attendees Ship Channel: Deep Water Centennial; the Centennial represent every major terminal along the Houston Family Festival at the Bayport Cruise Terminal attended Ship Channel, as well as shippers, carriers, pilots, tugs, by 3,000 families and community members; and a and other critical nodes of the maritime supply chain. rededication ceremony on the 100th anniversary of the Previous honorees have included Houston business leader Ned Holmes, Harris County Judge Ed Emmett, opening of the Houston Ship Channel. and Gulf Winds International founder Steve Stewart. ExxonMobil has donated $1 million to the 24 | February 2015
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Dredging
Dredging “Substantially Complete” at Barbours Cut, Bayport to be Finished in September 2015
I
n December 2014, the Port of Houston Authority announced that dredging of the federal portion of Barbours Cut is “substantially complete,” with only the final cleanup work left to be performed in January 2015. The dredge that had been working on Barbours Cut was moved to the Bayport Channel in late November to begin work on that location. The dredging at both locations should be finished by September 2015, according to PHA. The project, for which the U.S. Army Corps of Engineers issued permits in early 2014, allows for larger ships to call on the terminals in the Houston Ship Channel by widening and deepening the waterway. The Port of Houston expects these larger ships to become significantly more common once the expansion of the Panama Canal is completed in 2016.
The Port of Houston is continually dredging parts of the Houston Ship Channel throughout the year, but the project at Barbours Cut and Bayport Channel is specifically geared towards responding to the changes in shipping expected with the Panama Canal expansion. In fact, the move towards larger ships has already begun around the world. Once the widening is complete, along with the addition of new locks, the Panama Canal will be able to service container vessels with a capacity of up to 13,000 TEUs. While the Port of Houston generally handles 4,500 TEU vessels at present, ships carrying 8,000 to 10,000 TEUs are expected to call on Houston after the Canal expansion. With 66% of Gulf Coast container traffic moving through Houston, this dredging project will help ensure that our port can hold on to that market share as shipping companies utilize more massive ships. Barbours Cut was built in the 1970s and is 1.3 miles long and 300 feet wide. The current dredging deepened
Emily Mitchell, GHPB
the channel from 40 feet to 45 feet and moved it 75 feet to the north. In addition to this work, the Port of Houston Authority is bringing in larger cranes to service ships at the docks, with delivery expected in April 2015. The four ship-to-shore cranes from Konecranes cost $50 million and are capable of reaching across 22 containers, the size of a new post-Panamax container vessel, and are an improvement over current cranes that can reach across 13 to 16 containers. Construction of the Bayport Channel took place from the 1970s through the 1990s and is currently 3.5 miles long, 300 feet wide, and 40 feet deep. Serving one of the country’s largest container terminals, Bayport Terminal, the dredging project will deepen the channel to 45 feet and widen the federal portion to 400 feet. Unlike Barbours Cut, the Bayport Channel will not be shifted. A cutter-suction dredge is being used for the dredging at both sites, which has blades that slice the material to be removed through a vacuum intake. PHA is currently dredging about 10,000 cubic yards of material per day, but the rate will increase as additional dredges are brought into the project. The total quantity of material for the project, including widening and deepening, maintenance dredging, and berths, is expected to be about 6.3 million cubic yards.
In order to complete the project quickly, ahead of the Panama Canal expansion, the Port of Houston Authority paid for the dredging with the port’s operating revenues instead of going through the federal process. While Barbours Cut and Bayport Channel should be able to accommodate larger vessels immediately upon completion, the Houston Pilots Association is expected to evaluate the expanded channel before allowing ships to transit. ò Greater Houston Port Bureau | 25
Condensate
Commerce Department Issues New Guidelines Regarding Condensate Exports Emily Mitchell, GHPB
L
ast year saw important changes on the road towards lifting the U.S. ban on exporting crude oil. As reported in June 2014, the Commerce Department quietly expanded the categories of material allowed for export by granting licenses to two companies, Pioneer Natural Resources Co. and Enterprise Products Partners LP, to sell condensate overseas. Following this ruling, the ultra-light oil could be exported as long as it has been processed through a distillation tower. However, the Commerce Department did not explicitly detail exactly what constitutes the minimum level of required processing and many companies have decided not to follow in Enterprise and Pioneer’s footsteps. Furthermore, those companies that have applied for licenses since last summer have faced an indefinite hold on their applications. Potential condensate exporters now have a much clearer path forward thanks to new guidelines published on December 30, 2014, on the website of the Commerce Department’s Bureau of Industry and Security. Along with approving some of the license requests placed on hold earlier in the year, the Commerce Department has provided the most detailed explanation yet of what is required for companies to avoid violating the decadesold crude oil export ban. While the export ban has by no means ended, analysts are hopeful that this substantial step forward could lead to permission to export more types of petroleum products and, eventually, crude oil itself. The Commerce Department’s new guidelines are presented in the form of an FAQ. The first three questions relate to the restrictions on exporting crude oil, what constitutes crude oil under existing law, and whether lease condensate falls under this category. According to the webpage, “lease condensate, including lease condensate produced from tar sands, gilsonite, and oil shale, is defined as crude oil.” Although this statement is unequivocal, 26 | February 2015
the third question goes on to state that “condensate that has been processed through a crude oil distillation tower is…a petroleum product.” Under existing statutes and regulations, petroleum products are classified as EAR99 and are not subject to the export ban. The fourth question contains the most important information for companies looking to export condensate, as it defines the distillation requirements for the condensate to be considered a petroleum product instead of crude oil. According to the guidelines, there must be “material processing” in order to qualify, and “if there is no processing in the distillation tower, or the processing is de minimis, the liquid hydrocarbons will not qualify as petroleum products.” Furthermore, specific processes mentioned in the FAQ do not constitute processing for these purposes. Moving forward, the Commerce Department will consider a variety of factors in its decision making on a case-by-case basis. Specifically, the agency will look at changes in API gravity and percentage of different types of hydrocarbons between the input and output of the process, whether a company’s distillation process materially transforms the condensate into chemically distinct liquid streams, whether the
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Greater Houston Port Bureau | 27
condensate distillation process utilizes temperature gradients, and whether the resulting streams have other distinct purposes such as petrochemical feedstock. The factors listed in the FAQ do not constitute an exhaustive list, but companies may use them as guidelines when developing their distillation processes to prepare condensate for export. While the Commerce Department has retained the authority to approve licenses for companies to export processed crude oil and condensate, it also allows companies to “self-certify” if they believe their exports fall within the confines of the law. Prior to the December announcement, many companies were afraid to do so and run the risk of incurring criminal penalties; however, the published guidelines will likely lead to more self-certifications thanks to greater clarity in what the Commerce Department is looking for. According to a December research note by Citigroup Inc., the United States currently produces more than 3.81 million barrels of light and ultra-light crude oil
every day. Even though condensate exports are expected to increase with the new guidelines, exports will not necessarily increase enough to relieve the overflow of shale oil along the Gulf Coast. It also remains to be seen how the recent drop in oil prices will affect the fracking industry and whether the glut of shale oil, and condensate along with it, will dissipate. What is known, however, is that companies finally have a set of defined, public guidelines from the Commerce Department and will no longer have to roll the dice with regard to condensate and the crude oil export ban. ò
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For More Information or to Place Your Order: editor@txgulf.org (713) 678-4300
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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
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Greater Houston Port Bureau | 29
Commerce Club
Commerce Club Luncheon
January 2015
Featuring Keith Meyer, President and CEO of LNG America Judith Schultz, GHPB
K
eith Meyer, president and CEO of LNG America, cited LNG bunkering capabilities as the most significant factor in instituting LNG as a universal maritime fuel at the Port Bureau’s first Commerce Club luncheon of the year on January 8 at Brady’s Landing. Punctuating his remarks with pertinent infographics, Meyer shared his enthusiasm for LNG fuels with the 180 Commerce Club attendees. “The LNG America mission,” Meyer said, “[is to] provide clean and reliable LNG to the major fuel demand centers in North America and participate in developing the global LNG fueling network.”
Meyer is leading the company in fulfilling this mission by endorsing LNG as a global marine fuel, advocating Keith Meyer addresses attendees at the January 8th for the installation of LNG bunkering infrastructure in Commerce Club luncheon. the U.S., promoting LNG movement as an opportunity infrastructure in ports. The Port of Rotterdam began for enhanced revenue, and focusing on the Houston port bunkering LNG in July 2014, and 11 Baltic ports have as a leader in a national effort to use domestic LNG as a signed proclamations committing to bunkering LNG new marine fuel. fuels. The Asian ports of Singapore, Incheon and Meyer considers LNG marine fuel the best Pyeongtaek in South Korea, and Bussan, Japan, are option for fulfilling new emissions requirements and following their European counterparts in pursing LNG reducing fuel costs. A global marine fuel feasibility bunkering goals. study commissioned by LNG America came to several “This gives ship owners the confidence to put LNG conclusions, determiming that LNG bunkering is fuel engines in their vessels,” Meyer stated. Meyer occurring internationally and will come to the U.S., believes ship owners will prefer to do most of their future but LNG fuel adoption rates are impacted by ship type fueling in U.S. ports if the infrastructure is available to and service routes. The study also concluded that “soft them. Meyer named U.S. supply and production of sides” include operating policies approved by ports and LNG and the logistics of international shipping trade the U.S. Coast Guard, demand will be a “slow start” but routes as favorable factors that could position the U.S. as grow steadily, and rate of change is impacted by LNG the dominant provider. bunker supply availability. The Port of Houston ranks first in U.S. bunkering The availability of LNG bunker supply lay at the operations, making it a logical choice for LNG America’s heart of Meyer’s Commerce Club message. Europe has focus on implementing LNG marine fuel applications. been the leader so far in developing LNG marine fuel 30 | February 2015
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Commerce club The company has partnered with Buffalo Marine Service in Houston to develop the first U.S. LNG bunker vessel. “We found Buffalo Marine to be exemplary in their commitment to service, the environment, and willing to take on the challenge,” Meyer told the Commerce Club. “We are teaching them LNG, and they are teaching us bunkering.”
“Don’t think about it just as ‘push by barge,’” Meyer said as he described potential business development options, “Think about it as revenue enhancement.”
The question and answer session covered multiple topics, including the European Union’s funding assistance, Stockholm’s LNG bunkering project, shale exploration in Latin and South America, and vessel Intermodal optionality was another facet noted by security requirements. Meyer. LNG storage tanks – 40 ft. ISO containers – The next Commerce Club will be held on February can be transported by LNG barge, rail, or truck. LNG 12, 2015, and will feature Peter Fasullo, Principal/CoAmerica storage depots, strategically located in major Founder of En*Vantage. Fasullo, a longtime energy U.S. ports, will be available for third-party LNG buyers sector advisor, will discuss the impact of the current oil and sellers, providing the intermodal transporters and price fluctuations on the port region. Sign up by visiting suppliers the chance to create new revenue opportunities. www.txgulf.org or calling 713-678-4300. ò
Left: Keith Meyer addresses more than 180 attendees at the Commerce Club Luncheon on January 8, 2015. Above: Attendees observe traffic on the Houston Ship Channel.
Thank you to our table sponsors
Greater Houston Port Bureau | 31
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