March 2015 Port Bureau News

Port Bureau March 2015

Greater Houston Port Bureau

Spotlight on Mark Vincent Oil Prices, Rig Counts, and Layoffs: Looking at the Effects of Falling Oil Prices on the Texas Oil Industry TWIC Changes Houston Joins the Global Cities Initiative

www.txgulf.org

News

Understanding the Vessel Transit Process

Port Bureau

News

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

16 Understanding

the Vessel Transit Process 3 Captain’s Corner Underfunding - What To Do?

24 Spotlight on

Mark Vincent, PHA Director of Channel Development

13 GCI

Houston Joins Global Cities Initiative

4 Port Watch

30 Coast Guard/CBP

Texas Ports Kick Off 2015 With a Strong January

Coast Guard and CBP Honored by Community

6 Oil Prices, Rig

34 Commerce Club

Counts, and Layoffs

Looking at the Effects of Falling Oil Prices on the Texas Oil Industry

February 12, 2015, featuring Peter Fasullo, Principal and Co-Founder, En*Vantage

14 TWIC Changes

Art Director Kyle Beam Writers Emily Mitchell Judith Schultz Patrick Seeba Photographers Kyle Beam Patrick Seeba Port Bureau Staff Jeannie Angeli Dave Cooley Al Cusick Megan Essenmacher Cristina Gomez Janette Molina Christine Schlenker 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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2 | March 2015 www.txgulf.org

Captain's Corner Underfunding - What to do?

When President Obama signed the Water Resources Reform and Development Act, known as WRRDA, last June, industries doing business in and around America’s waterways hoped that the Harbor Maintenance Trust Fund would finally be put to good use in restoring our steadily deteriorating port infrastructure. Those of us here at the Houston port know all too well just how much work (and funding) is needed to keep the channel in top shape.

The Harbor Maintenance Tax is supposed to go to the U.S. Army Corps of Engineers to pay for the necessary maintenance of the Houston Ship Channel.

However, less than 60% of this money actually gets used in any given year, contributing to large budget shortfalls for things like dredging projects. WRRDA was supposed to help ease some of these funding gaps by sending more resources to the Army Corps through the HMTF. Unfortunately, it does not look like our hopes will be fulfilled just yet. The FY2016 budget proposed by President Obama in February includes only $915 million from the Trust Fund, well short of WRRDA’s goal of $1.25 billion. It is safe to say that there are still plenty of hurdles in front of us when it comes to getting the federal funding we so desperately need.

Continual dredging of the Houston Ship Channel.

The Houston Ship Channel itself needs about $100 million every year just for maintenance – a drop in the bucket compared to the $178.5 billion in statewide economic impact our port provides, if you ask me.

This lack of funding is leading to significant and lasting problems, with port businesses and partners facing long delays, mounting costs, and, most troubling, unpredictability. The Army Corps is doing the best it can to scrape together enough money just to maintain the status quo, making it hard for the rest of us to adequately plan and prepare for future growth. And Houston, along with all the other Gulf Coast ports, is definitely growing. Fast.

The problems of an underfunded system are slowly starting to trickle down into other areas, as well. The paperwork required to obtain permits has always been tedious, but now companies are submitting so many permit requests for new docks and expansions of old ones that they are piling up faster than they can be processed. Our limited dredge material placement areas are stressed by the sheer amount of material produced every year. The Houston port area needs more resources, more boots on the ground, and more brainpower – put simply, we need more money, especially from the federal government.

I am sure you will all agree that I am not exaggerating when I say that dredging, or the lack thereof, is one of the biggest threats our port faces. While I know that many of our loyal readers are not necessarily affected directly by dredging issues, believe me when I say that it is a problem that affects the entire supply chain all the way down to the consumer.

Therefore, the Port Bureau recently

CAPT Bill Diehl, USCG (Ret.) established a committee specifically dedicated to addressing the dredging problem on the Houston Ship Channel. We are bringing together Port Bureau members to discuss these issues and develop forwardthinking solutions. The kick-off meeting on February 13 got us off to a great start, identifying individual business challenges and throwing out ideas about how to overcome the obstacles in front of us. We welcome any and all input from Port Bureau members, as well as other port stakeholders, so give me a call or send me an email if you are interested in participating.

Bottom line, the Houston Ship Channel will always require substantial maintenance and a lot of dredging to keep it competitive and prepared for the changes currently underway in the shipping industry. Without the Houston Ship Channel, there is no Port of Houston, and I look forward to working with all of you to help address our funding and dredging needs.

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Greater Houston Port Bureau | 3

© Christine Schlenker

PORT WATCH

Texas Ports Kick Off 2015 With a Strong January Tom Marian, Buffalo Marine Service In the annals of things undone due to simple neglect, Richard III’s kingdom was allegedly lost in the Battle of Bosworth Field for lack of a nail. So goes the notion that the smallest of things over the passage of time can have a profound impact on the mightiest of systems. Whether that is the derailment of a transported commodity or the availability of dock space in a just-intime trade environment, the consequences can be difficult to foresee from a distance.

What does any of this have to do with the January 2015 vessel arrival numbers?

When one adds a faltering rig count due to a worldwide excess of crude oil, qualitative easing throughout the Eurozone, and zero inflation in China, the stage may be set for economic uncertainty closer to home.

Back at home, Texas ports experienced their best January in a number of years, particularly on the brownwater front. The number of tows that called upon Houston or navigated across its inland waterways was

one of the highest in recent memory and even eclipsed December’s torrid monthly tallies. Oceangoing tows on the Houston Ship Channel charted a 22% monthly jump and exceeded the previous year’s numbers by over 44%. Likewise, inland tow numbers pushed through the 12,000 mark. This represented a 4% month-to-month gain

and an increase of more than 12% over January 2014’s tow totals. The bulk of the activity was due to the frenetic pace of moving petrochemical products to and from the refinery and storage distribution centers concentrated along the Gulf Coast.

Nevertheless, the non-chemical component of this activity is not sustainable in the

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

4 | March 2015 www.txgulf.org

Port of Houston Deep Draft Vessel Arrivals

port watch

Jan. 2015 vs. Jan. 2014 250

Jan. 2015 YTD (Total: 701)

Jan. 2014 YTD (Total: 664)

0

short run if crude prices remain below $60 a barrel.

The remainder of the vessel movement activity across the Texas coast fell off after the strong December finish, to the tune of 3%. However, there were several bright spots when the numbers are compared against the previous year. Specifically, January 2015 was 3% above the first month of 2014. Both the Ports of Brownsville and Corpus Christi logged double digit year-todate gains of 24% and 15%, respectively.

Unfortunately, Brownville’s ship count dropped by more than 10% over the last month. Corpus Christi, on the other hand, experienced a 4% monthly rise despite a falling rig count in the Eagle Ford shale play. To the north, the Port of Freeport’s vessel arrivals saw a significant wane vis-àvis the previous January and the final month of 2014 by 11% and 18%, respectively.

Sabine’s vessel count also dropped on both fronts, with 2% fewer arrivals against January 2014 and nearly 11% off from the preceding month. This should come as no surprise given that end-of-year inventory movements generally result in fewer vessel

movements at the onset of the new year.

Yet, the slight drop against January 2014 may foretell a decline in distillate exports.

The Port of Texas City may add credence to this possibility as it kicked off 2015 21% below that of January 2014 and 5% behind December.

The Port of Galveston grabbed top honors for the month with a 29% leap in vessel arrivals. While it opened 2015 over 2% above that of 2014, this slight positive bump could be attributable to a further reining in of offshore drilling activity as rigs are deactivated until drilling margins improve. The Port of Houston also started out on the right foot with a 6% year-to-date rise but faltered by over 4% against December’s vessel arrival totals.

Granted, in light of the robust December 2014 totals, the monthly drop was not unexpected. Overall, the vast majority of vessel categories could not keep up with the results of December. Bulk and general cargo arrivals were down 4% and 3% for the month, respectively. Fortunately, neither category documented a year-to-date loss.

The trio of energy movers – tank vessels,

chemical tankers, and LPG carriers – were all off for the month but ushered in 2015 stronger than 2014. Container vessel calls for January were slightly higher than the prior month and a tad off from 2014.

All in all, Houston enjoyed a strong start to 2015 after an equally strong end to 2014. Which raises the following question: Does this mean that following seas and fair winds are in store for the year? There are some signs that the Gulf Coast stands to benefit from congestion and labor uncertainty on the West Coast. Yet, much of the redistribution of cargo also hinges on the completion of the third set of locks at the Panama Canal – an event that may not take place until sometime in early 2016.

There are other indications that the global economy that drives regional economic activity may be ebbing, hence the most recent spate of various countries “juicing” their currencies in order to stimulate spending and consumption. After all, for want of a dollar a sale was lost, for want of a sale the store was closed, for want of a store a job was lost, for want of a job an economy was lost!

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Greater Houston Port Bureau | 5

Oil Prices

Oil Prices, Rig Counts, and Layoffs Looking at the Effects of Falling Oil Prices on the Texas Oil Industry Emily Mitchell, GHPB As oil prices have taken a substantial dive since last summer, the energy industry finds itself faced with unexpected challenges that could have long-term ramifications, both worldwide and at the local level. The lower oil prices have proven to be more than just a temporary blip and the downturn is now the longest slump since the global financial crisis.

Thanks to a fundamental change in the supply model, low prices are expected to stick around even longer and are already leading to significant cuts in capital spending, thousands of workforce layoffs, and a considerable decrease in the number of rigs running in the U.S. With oil under $60 per barrel for a prolonged period of time, the future of the U.S. shale industry and the Houston economy is very much an open-ended question.

Capital Spending A looming question throughout this period has been whether U.S. exploration and production (E&P) and oilfield services companies will be able to weather such low prices. It is well-known that oil wells become unprofitable as prices fall, and companies’ bottom lines are certainly starting to feel the pain. A recent survey of oil producers conducted by Tudor, Pickering, Holt & Co. showed that growth in the E&P sector would start to slow if prices fell below $80 per barrel, with 75% of respondents saying they would cut spending if oil hit $75 per barrel. With the price for a barrel of oil tumbling below $50 in January, and hovering in the low $50s in mid-February, it is not surprising that oil

companies have started announcing deep cuts to their spending plans for 2015.

Capital spending by energy companies constituted 0.9% of U.S. gross domestic product in 2013, which was the largest share in over 30 years, and continues to hover around 1% of GDP. However, these companies are particularly sensitive to extreme swings in oil prices, such as the one the industry has experienced over the past six months. According to Barclays analysts, ExxonMobil loses $2.8 billion in annual cash flow with every $10 per barrel drop in oil price. For Chevron, this same decrease per barrel erases $3.85 billion in cash flow.

Since January, almost all of the major companies in the industry have announced substantial spending cuts. Together, Shell, Occidental, and ConocoPhillips plan to reduce spending in 2015 by $10 billion.

Chevron announced a 13% decrease in capital spending due to low oil prices, with the oil giant’s 2015 plan amounting to $35 billion. BP has frozen salaries and wages for its employees worldwide. Assuming an average price of $70 per barrel, analysts at Cowen and Co. expect E&P firms to cut spending by $116 billion, or 17%.

Companies throughout the industry are laying down rigs, declining to drill new wells, reducing orders or re-negotiating prices for equipment, and laying off workers in hopes of saving on costs and riding out the downturn.

Rig Counts One of the more dramatic consequences of the price dip is the falling rig count. On February 20, data released

6 | March 2015 www.txgulf.org

A drilling rig in a Pennsylvania shale play.

by Baker Hughes showed that the number of oil rigs in the U.S. stood at 1,019, a drop of 37 from the previous week. This followed the second highest weekly decline since July 1987 when the number of oil rigs in the U.S. fell by 84 on February 13 from the previous week. The latest report marked 11 consecutive weeks of falling rig counts and a more than 36% drop from the October 2014 peak of 1,609 oil rigs. As of February 20, the total U.S. oil and gas rig count stood at 1,250 and was at its lowest

Greater Houston Port Bureau | 7

oil prices level since July 2011. In its recent earnings conference call, Baker Hughes noted that past downturns saw rig count declines of 40% to 60%.

Historically, the rig count has been important to industry watchers because it shows how many rigs are actively drilling and serves as a confidence indicator among oil producers. For example, the Permian Basin, the second largest oil producing region in the U.S., currently has the fewest number of active rigs in almost four years and one economist predicts that two-thirds of Texas rigs, or about 600, will be shut down if prices remain low and demand continues to weaken.

Oil Production Despite the considerable decrease in active rigs over the past 11 weeks, many have begun to question whether the rig count signifies as much as it used to. In the current environment, it is becoming increasingly clear that fewer rigs do not necessarily translate to less oil production.

In fact, production is still expected to increase in 2015, albeit at a slower pace

than previously thought. Oil output in the U.S. is maintaining record highs and crude inventories continue to soar. Though companies have laid down hundreds of rigs already, production is generally being cut back at the lowest-producing wells and, with new drilling technologies, companies can drill faster and at a lower cost than in the past. Currently, Texas alone produces more than 2 million barrels of oil per day.

Therefore, analysts are not predicting a massive cutback in production levels anytime soon. Companies are better off producing from existing wells at a loss and delaying or cancelling new projects, so any reduction in output will take time to manifest. Oil companies most likely will not seriously pull back on production unless prices fall so low that they no longer cover production costs. According to a Wood Mackenzie report, only about 1.5 million barrels per day worldwide would become “cash negative� if oil hits $40 per barrel, with a substantial amount coming from U.S. stripper wells and certain oil sands projects.

Wood Mackenzie estimates that there are about 400,000 stripper wells in the U.S. that have operating costs of $20 to $50 per barrel. These types of wells generally produce only a few barrels of oil every day and are often some of the first wells to be shut in when companies need to cut costs.

However, in this case, not all of these wells are money losers and some that are may continue to be pumped so producers do not lose their leases.

Even with the deep spending cuts announced recently, very few companies are saying that they will miss their production targets. According to a study performed by Rice University, oil companies drilled 28% fewer wells in January 2015 compared to June 2014. However, the amount of crude oil they can pump from those new January wells is only 8.5% less than that from the wells drilled in June. Companies may be abandoning some wells and drilling fewer new ones, but robust production levels are here to stay for the foreseeable future.

In an International Energy Agency (IEA) report released in February, the

Oil and Gas Rigs Operating in the U.S. September 2014 - February 2015 2000 1900 1800 1700 1600 1500 1400 1300 1200

1100 1000

5-Sep-14

5-Oct-14

5-Nov-14

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U.S. Oil & Gas Rigs

GHPB Analysis of Baker Hughes Data 8 | March 2015 www.txgulf.org

5-Jan-15

U.S. Oil Rigs

5-Feb-15

oil prices

WTI Crude Oil Futures Price September 2014 - February 2015

$110

$100

$90

$80

$70

$60

$50

$40

$30

2-Sep-14

2-Oct-14

2-Nov-14

2-Dec-14

2-Jan-15

2-Feb-15

GHPB Analysis of U.S. Energy Information Administration Data

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oil prices organization forecast that excess supply will persist into the middle of 2015, with oil inventories in industrialized nations reaching up to 2.83 billion barrels. This growth in stockpiles will only begin to slow after July, according to the IEA. Additionally, the Energy Information Administration (EIA) wrote in its ShortTerm Energy Outlook on February 10 that total U.S. crude oil production will average 9.3 million barrels per day in 2015 and 9.5 million barrels per day in 2016, just shy of the 1970 record of 9.6 million barrels per day. Despite the glut of crude oil that helped spur the downward trajectory in oil prices, U.S. producers will continue to crank out the oil this year.

indirectly connected to oil and gas. Layoffs generally translate to reduced income and consumer spending in Texas, risking a possible recession. According to a Moody’s Analytics economist, $40 per barrel crude oil would sink the city of Houston into an

Layoffs Currently, there are approximately 300,000 oil-related jobs in the Houston area, ranging from oil production and services to pipelines and chemicals. Thanks to the energy boom of the past few years, 8.5% of jobs added in the state of Texas since the 2008 financial crisis have been in the E&P sector. However, budget cuts brought on by $50 per barrel crude oil are prompting companies to lay off thousands of workers, with a large chunk coming from Texas. A report by Professor Bill Gilmer at the University of Houston suggests a loss of 75,000 jobs in Houston alone if the worst case scenario plays outs. Moreover, the Federal Reserve Bank of Dallas is forecasting job growth of about 250,000 jobs in Texas for 2015, down substantially from the 400,000 new jobs added in the state in 2014.

In January, U.S. employers announced a total of 53,041 job cuts, according to a report

by Challenger, Gray & Christmas Inc. Of those cuts, 20,193 occurred in the energy industry with 19,833 in Texas alone. To put this in perspective, the energy industry announced a total of 14,462 job cuts in all of 2014. Furthermore, the layoffs will not be isolated to those industries directly involved in exploration and production and are likely to seep into industries only

10 | March 2015 www.txgulf.org

economic recession while the city would just barely escape if the price settled at $50 per barrel.

Thanks in part to the fact that it is easier to wind down shale operations than conventional wells, the latest rounds

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Oil Prices of layoffs are coming more quickly and cutting more deeply than during the 2008 financial crisis. Companies are positioning themselves for the next upswing and appear to be focusing cuts at the back-office level rather than in operations. Analysts say that layoffs should reach their peak over the next couple of months.

So far, announced job cuts include 8,000 at Weatherford, 6,400 at Halliburton, 9,000 at Schlumberger, and 7,000 at Baker Hughes. More than 100,000 layoffs have been announced worldwide as of February 16, 2015.

Conclusion The sudden and unexpected drop in oil prices came about thanks to fundamental changes in the oil industry.

Historically, Saudi Arabia has served as the swing producer, ramping production up or down in response to changes in the market. However, with OPEC’s decision last year not to reduce production despite a considerable global oversupply, it is clear

that the oil industry has entered a new phase. The new supply model places the U.S. shale industry more closely to the role of swing producer, with natural market forces determining prices and leading to a more cyclical industry. As prices drop, producers will respond by gradually shutting down wells, cutting budgets, and laying off their workforces until higher prices are restored. In the process, some smaller companies might even fail.

But the technology and expertise will still exist and, once prices rise, producers will be quick to start up again. As Leonardo Maugeri, a former top manager at Eni, wrote recently, “The truth is that U.S. shale production can be turned on and off almost immediately, and this represents a dramatic novelty for the oil market.” Oil prices probably will not stay as low as they have been in the past several weeks, but we have also most likely seen the end of $100 crude oil for a while.

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Global Cities Initiative

Houston Joins Global Cites Initiative Emily Mitchell, GHPB On January 16, 2015, the Greater Houston Partnership announced that Houston has been chosen to join the Global Cities Initiative (GCI). A joint project launched by the Brookings Institution and JPMorgan Chase, GCI was established in 2012 with the goal of helping metropolitan leaders grow and strengthen their regional economies through global connections and competition. Houston joins 27 other metropolitan areas in the United States in the GCI Exchange, each of which was selected through a competitive process that measured a metropolitan area’s commitment to pursuing global competitiveness. The Global Cities Initiative is a five-year, $10 million project.

According to the Brookings Institution, the GCI’s ultimate goal is “to foster an international network of metropolitan leaders who are committed to trade, invest and grow together.” The project aims to help the chosen metropolitan areas better leverage their global assets, provide leaders

with actionable steps towards expanding their cities’ global reach, and create an international network of leaders who are focused on developing global trade relationships.

The foundation of the GCI Exchange, and the first step that Houston will accomplish, is the creation of integrated export and foreign direct investment strategies. The export plan will involve a market assessment, an export plan with specific goals and strategies, an implementation plan, and a policy memo identifying necessary reforms. The foreign direct investment strategy will complement the export strategy, and both will continue to evolve as Houston and the other participating metropolitan areas enhance these strategies through research and engagement on a global level.

In the press release announcing Houston’s selection, Mayor Annise Parker said, “This will help promote our efforts to showcase Houston as the gateway to the

Americas, enhance investment possibilities and build stronger networks linking our key commerce and trade counterparts.”

The Greater Houston Port Bureau actively supported the Greater Houston Partnership and the City of Houston in their bid to join the GCI Exchange. As the busiest port in the country and the top exporting marine port in the U.S., Houston’s economy is fundamentally tied to the success of the Port of Houston.

While the benefits of Houston’s exporting strength are already felt worldwide, the development of a cohesive export strategy and extended global networks will further enhance Houston’s position in a global economy.

With Houston’s selection to participate in the GCI Exchange, the Greater Houston Port Bureau will provide support on any maritime-related matters.

For more information about the Global Cities Initiative, visit www.brookings.edu/ about/projects/global-cities.

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Cities Participating in GCI Exchage

Greater Houston Port Bureau | 13

Changes to PHA Escort Credentialing Procedures for 2015 As of January 1, 2015, the Port of Houston Authority (PHA) has made changes to PHA Tariff No. 8, Subrule 51, regarding Port Security Fees.

In accordance with the tariff, escort credentials for escorting non-TWIC personnel shall require: • A $50 initial fee for training, badge, and registration per escort credential holder, which shall be applicable to both new and three-year renewal escort credentials; and • A $20 badge replacement fee, which shall be applicable to replacement badges issued during the valid period, including lost badges and company transfers.

There will be no charge to re-issue escort credentials due to the expiration of a TWIC card and the registration of a new TWIC card within the threeyear valid period.

Accordingly, effective February 1, 2015, PHA Credentialing is requiring payment as noted in the tariff prior to the issuance of escort credentials.

Payment is accepted in exact change cash or by billing to PHA-approved credit accounts.

Individuals seeking to obtain escort credentials must follow the procedures established by the Port of Houston Authority.

2015 Commerce Club Luncheons March 12, 2015

Col. Richard Pannell, U.S. Army Corps of Engineers Galveston District

Current Sponsors:

Col. Richard P. Pannell assumed command of the U.S. Army Corps of Engineers Galveston District on July 9, 2013. Prior to assuming command of the Galveston District, Pannell served as the Corps engineer for the III Armored Corps at Fort Hood, Texas, since July 2012.

Originally from Athens, Ga., Pannell graduated from Phillips Exeter Academy in New Hampshire in 1985 and attended the United States Military Academy at West Point, N.Y., where he received his commission in the USACE in 1989.

Pannell’s military service highlights include posts as deputy commander, 18th Engineer Brigade, Heidelberg, Germany (2008-2011); commander, 7th Engineer Battalion, Fort Drum, N.Y. (2006-2008); battalion S3 and executive officer, 9th Engineer Battalion, Schweinfurt, Germany (2003-2005); and commander, A Company and C Company, 554th Engineer Battalion, Fort Leonard Wood, Mo. (1994-1997).

Pannell earned a Master of Science in Water Resources Management from the Nelson Institute for Environmental Studies, University of Wisconsin-Madison and a Master of Science in Geography from the University of Wisconsin-Madison. He also has a Master of Strategic Studies from the U.S. Army War College. His awards and decorations include the Bronze Star Medal (3), Meritorious Service Medal (5), Army Commendation Medal (2), Combat Action Badge, Senior Parachutist Badge, Sapper Tab, and Ranger Tab.

Upcoming Luncheons: April 9, 2015.......................VADM C.D. Michel, USCG Deputy Commandant for Operations,

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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

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

Vessel Transit

Understanding the Vessel Transit Process

Patrick Seeba, GHPB As one of the busiest ports in the United States, the Port of Houston sees thousands of ships plying its waters every year. On an average day in 2014, 66 deep draft vessels and 359 push boats transited the Houston Ship Channel. This journey, which can stretch up to 59 nautical miles from the Sea Buoy to the Turning Basin, begins long before a pilot steps aboard, a tug affixes its tether, or a longshoreman handles a piece of cargo.

The Paperwork A ship’s journey into Houston begins with the contractual agreement between the shipper and the consignee. First-order shippers rarely complete a transaction entirely in-house; instead, a carrier is contracted to handle the freight movement.

The contract governing the use of a vessel is called a charter party and, when two principals agree to one, the vessel is leased out either for a set period of time or a specific point-to-point voyage. There are several common types of vessel charters that cover most movements at sea, which include: • Voyage Charters – The carrier and charterer agree upon specific terms for a single voyage, with operational liabilities and responsibilities shared based on the outcome of negotiations between principals.

A Jacob’s ladder hangs from the side of a bulk carrier near the Houston Ship Channel Sea Buoy.

• Time Charters – A principal leases a vessel for a set period of time, often under a clause requiring the vessel owner/ operator to handle maintenance, repair, manning, and navigation. Responsibility for commercial activities, however, belongs to the charterer.

• Bareboat or Demise Charters – This subclass of time chartering involves the charterer assuming all of the liabilities and responsibilities of a ship owner, as they rent just-a-hull for a specified period of time.

• Split or Space Charters – A shipper leases less than a full vessel, which can involve a specified or unspecified hold or loading space.

Charter parties cover all manner of details that dictate the terms of a vessel’s voyage, including, but not limited to, vessel specification, cargo details, responsibility for appointment of local agents, loading and discharge terms, laytime, and demurrage.

The complex nature of charter parties, combined with their highly specialized terms, means that most charter parties include a provision requiring arbitration under a specific jurisdiction in the event of any conflict or disagreement over the terms and responsibilities.

Upon completion of a charter party, and in accordance with its terms, the appropriate principal will arrange for a

16 | March 2015 www.txgulf.org

local agent to represent the interests of either the owner/operator or the consignee while the ship is in port. This port agent will attend to the ship’s business of provisioning, repairs, surveys, port services, and organization of cargo handling, while also being responsible for coordinating pilots, tugs, line handlers, and inspections as a vessel transits through the port.

The Ship’s Agent In Houston, over three dozen vessel agencies compete for the ability to handle a ship’s affairs with speed, efficiency, and reliability. Several of the largest agencies, such as Port Bureau members Moran-Gulf Shipping Agencies, Inchcape Shipping Services, Biehl & Co., and Norton Lilly International, each handle over 500 vessel arrivals per year while others, such as Odfjell, Transmarine Navigation Corporation, Seaboard Marine, T. Parker Host, GAC, and American Shipping & Chartering, handle a fewer number of arrivals with a similar level of professionalism.

These agencies are specifically hired to provide local expertise, so they must be fully prepared to work with each service agency and stakeholder in pursuit of a smooth journey. In addition, the agent is often the single point of contact for the vessel’s crew with regard to the services they may need after a long voyage at sea. This means that their work does not end once the vessel is

Vessel Transit tied up at the dock: Most owners, managers, and charterers have specific reporting and handling requirements along with specialized instructions for the vessel based on the cargo it is carrying.

Agencies have a long and complicated history but, even in the age of instant communication, their specialized skills remain in high demand. “We have to know what’s going on not only with every ship, but with each terminal that they dock at, have relationships with the stevedores, the pilots, the tugs, and the line handlers, and know the rules and regulations necessary so that the vessel won’t be delayed,” explains Bob Lain, Moran-Gulf ’s Director of Port Information and Affairs. In 2014, Moran was the order agency responsible for nearly 700 of the ship channel’s 8,335 vessel arrivals. “It all starts with the owners,” he says. “Once they send us the documentation to secure funds for a port call, we begin the process of advising them and the vessel’s master in preparation for arrival on the Houston Ship Channel.” Agencies may receive as much as 30 days prior notice for some chemical or containerized cargos operating under a liner service; however, they may not receive any notice when a tanker anchored offshore is diverted from another port or the commercial realities of commodity trading call for a last-minute terminal change.

The agent works with the owners and the master while the ship is still at sea in order to ensure that the proper pre-arrival paperwork is completed before the ship enters U.S. waters and the Houston area.

The U.S. Coast Guard’s Electronic Notice of Arrival (ENoA) is one such example.

This form is used by the National Vessel Movement Center, the Coast Guard’s clearinghouse for required reporting of vessel movements in U.S. waters, to clear a ship to enter a U.S. port and must be submitted at least 96 hours prior to arrival. The form asks for specifics about the ship’s construction, ownership, cargo, crew, passengers, and previous port calls, information which is then vetted before the ship is either allowed to enter the U.S. or held for further review.

Other necessary documentation for a vessel’s transit might include U.S. Customs and Border Protection’s (CBP) Automated Manifest (cargo details submitted for review) or 3171 form (an application for permit or license to lade or land certain cargos), the National Ballast Information Clearinghouse’s ballast water report (providing a history of the vessel’s ballast water tanks for Coast Guard inspection), or a tank vessel’s report on their Average Most Probable Discharge (AMPD) coverage (ensuring that vessels carrying certain oils have response plans in place to cover a potential spill or discharge).

The Houston Pilots prepare to board the M/V Madrid Express from the Pilot Boat Bayou City.

In addition to the required paperwork, every foreign flagged vessel calling on a U.S. port must undergo annual inspections by the Coast Guard’s Port State Control (PSC) inspectors. Sector Houston-Galveston performed 1,159 safety inspections and 1,043 security inspections in 2013, both representing approximately 12% of total inspections nationwide.

Furthermore, of the 2,119 certificate of compliance inspections (particularly rigorous inspections of tank and passenger vessels) performed Coast Guard-wide in 2014, Sector Houston-Galveston (including Port Arthur) performed 703 of them.

A Port State Control inspection involves USCG inspectors verifying that a vessel’s condition complies with certain domestic and international regulations that govern a vessel’s seaworthiness, safety, and security. PSC officers will board a vessel at least once a year as they enter the U.S.; however, a vessel may be targeted for inspection more often. Lloyd’s Register notes that the likelihood of a vessel being targeted by PSC officers may increase if the vessel has been detained in the previous year, if deficiencies have been found during a previous PSC inspection, if the vessel’s flag state has not ratified international conventions, if the vessel is over ten years old, or if the vessel’s class certificates are issued by non-recognized organizations.

The Madrid Express passes alongside the M/V Maersk Rotterdam in Galveston Bay. Greater Houston Port Bureau | 17

Vessel Transit While the inspection of a vessel

by PSC is not a punishment, nor is it intended to create trouble for the ship, Coast Guard inspectors will look to ensure that, for example, correct tanks are being used for oil retention, the vessel’s oil record book is correct, and written tank records match physical soundings. On the bridge, inspectors want to ensure that the vessel’s charts are up-to-date and that its lights, echo sounder, emergency position beacon (EPIRB), and alarms are in proper working order. Though inspectors may find deficiencies, this does not necessarily stop a ship from entering port. Rather, the officers may issue a report requiring the vessel to rectify any deficiencies within a certain period of time or prior to its next movement, port of call, or departure.

If a vessel is detained or expelled, the inspectors must clearly articulate their reasoning, and the Coast Guard has an appeals process that allows a class society or charterer to protest the action. During the 2013 calendar year, the 2,102 safety and security examinations performed in Sector Houston-Galveston resulted in five detentions and one denial of entry or expulsion.

Once a vessel’s documentation is in order and it has been cleared by the Coast Guard, the port agent can begin coordinating between local service providers for the vessel’s transit into Houston.

onboarding pilot. Working 365 days a year, the combined experience and training of the 86 full and 11 deputy pilots ensures that vessels make their transits safely and smoothly all day, every day. While on

board the vessel, the individual pilot is in the best position to determine what actions should or should not be taken at any given moment, and their on-scene discretion is an important factor in ensuring safe transits.

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Transiting a Restricted Channel The Houston Pilots are responsible for providing the vessel’s master with expert advice while navigating the Houston Ship Channel. As a ship arrives at the Sea Buoy, the agent calls for a harbor pilot who then boards the vessel via a Jacob’s ladder or gangway suspended off the side of the ship. This seemingly commonplace maneuver means that both the pilot and the vessel must continuously monitor local weather and sea conditions so that a sudden swell does not place the vessels at risk or endanger the life of the

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Finally, as the tugs push each ship in position, professional line handlers dart in and around the vessel, mooring it in place and ensuring that it stands fast by securing the ship to shore-side emplacements or bollards.

Arrival

A Coast Guard inspection team conducts a Port State Control inspection. ©U.S. Coast Guard

Adding to the routine exertion required to bring a vessel into berth, the Port of Houston’s status as a landlocked port means that, at best, the ship channel is 530 feet wide and 45 feet deep, with 235 foot barge lanes dredged to 12 feet flanking the main channel. However, once a vessel moves into the upper portion of the Houston Ship Channel, the width can thin from 530 feet at Morgan’s Point to 300 feet at the Beltway 8 Bridge, and as little as 250 feet near the City Docks. This means that, for safety reasons, the Houston Pilots work closely with the Army Corps, terminal operators, and the Coast Guard to implement guidelines governing the vessel sizes that can make routine movements at various points in the channel. At Houston Fuel Oil, for example, Docks 2 and 3 are situated close enough together that, even when dredged to project depth and width, vessels situated at or moving to and from these docks must have a combined beam of less than 290 feet to make sure there is enough space for both vessels to maneuver.

Transiting a depth- and widthrestricted channel is difficult enough, but the recurring inability of the U.S. Army Corps of Engineers to maintain the channel at its project depth and width makes movements even harder. In a report to the Port of Houston Authority, the Army Corps noted that, as of the first quarter of 2015, only 5.9% of the Houston

Ship Channel was dredged to its full authorized depth across the channel’s full project width. PHA Director of Channel Development Mark Vincent notes that, while this number is alarming, 40% of the channel does have either the middle or two contiguous side quarters at full project depth. Therefore, the pilots are able to facilitate movements by relying on their skill and vigilance to “squeeze by, wherever there’s room to safely move.”

During transit, a vessel checks in regularly with the Houston Vessel Traffic Service, operated by the U.S. Coast Guard.

While it does not order specific routing like an air traffic controller, the Houston Vessel Traffic Service is manned 24 hours a day and provides mariners with valuable information as they move through the busy waterway. The service coordinates issues such as channel closures, notifies ships of potential passing situations, and interfaces with both deep draft vessels and tug/tow packages.

As a ship approaches its assigned berth, one of the 33 tugs owned by Suderman & Young Towing Company or Bay Houston Towing Company, and operated by G&H Towing, maneuvers the vessel into the dock. These harbor tugs can range from a single screw, 1,700 horsepower tug like the Frances E Haden, which has been assisting vessels in Houston since 1967, to the 2013-built Zeus – a 5,150 horsepower

Pulling into a berth, agents will meet the vessel to address arrival formalities.

For vessels arriving from foreign ports of loading, CBP officers meet the ship to obtain information about the voyage, gross and net tonnage, and crew details. While importers of record submit electronic cargo manifests to CBP under programs such as the 10+2 rule, all personnel along with their accompanied baggage, property, cargo, and associated documentation are subject to inspection. In addition, though containerized cargo and non-exempt break bulk cargo data is entered into CBP’s Automated Manifest System prior to loading, some bulk and break bulk cargos only have to be reported before the vessel sails. Based on targeted risk scores, CBP officers may elect to perform trade enforcement inspections to ensure that goods are correctly classified and weighed for assessment, and to prevent trade-related fraud, labeling violations, anti-dumping and countervailing duty circumvention, or smuggling. These timeconsuming procedures may include action up to and including physically unpacking a container and examining all of its contents before releasing the container for shipment.

While a vessel is tied up, the port agent deals with issues that may have arisen during the voyage. Standard requests include arranging for bunkering, provisioning, or inspections, facilitating crew changes, or clearing delivery of spares and equipment.

While that may seem to be a simple task, safety and security regulations, especially those promulgated since the passage of the 2003 Maritime Transportation Security

Greater Houston Port Bureau | 19

vesseltransit Act (MTSA), have created significant disincentives for terminal operators to allow transit of personnel and material through their facilities.

Since the implementation of MTSA in 2003 and the TWIC program in 2008, facilities are required to file Facility Security Plans with the Coast Guard detailing how the terminals handle security. These plans must detail measures for access control, security procedures for the delivery of vessel stores and bunkers, monitoring measures, and documentation related to audits, reports, and daily activities. As such, many facilities along the Houston Ship Channel have instituted tariff amendments that correspond with the increased cost of doing business. One oil terminal in Houston, for example, notes in its tariff that “groceries, equipment, etc., excluding fresh water, regardless of if received by water or land (will incur a) onetime charge of $750; Lube oil delivery via barge only…a charge of $1000; Removal of slops…a one-time charge of $1,000; charge for shore gangway usage is $1,250/ vessel (plus) $500/day.”

In addition to these sorts of charges, many terminals along the Houston Ship Channel have restricted deliveries from barge to vessel. This means that bunkers must be delivered via shore tanks and some repair tasks must be done from layberth.

“It’s definitely harder than it was ten years ago,” notes a Houston-area agent, who gave examples of facility security officers requiring original receipts for ship spares, personal escort of parts by the agent to a vessel, and high fees for alongside operations. “But on the plus side,” he continues, “there are some terminals, like Targa, that do all they can to make things run smoothly.” David Clark, the manager of Targa’s Galena Park terminal, smiled when informed of the compliment, saying, “Look, if the Coast Guard lets us do it, and if we can do it safely, we’re here to facilitate the movement of cargo for our customers.”

Vessel Access

Line handlers from Houston Mooring Company prepare to lash a stern spring line to a bollard at Barbours Cut. One occasionally contentious issue amongst port stakeholders is the matter of seafarer access. While requirements for providing seafarer access must be included in a Facility Security Plan submitted to the Coast Guard, a study performed by the Seamen’s Church Institute found that, at some facilities around the United States, access for shore leave, crew change, or visitation is restricted due to either facility policy, financial requirements associated with escorts, or operational issues.

Recently, the Coast Guard and the Department of Homeland Security submitted a notice of proposed rulemaking and request for public comment in the Federal Register to address seafarer access issues. In short, the Coast Guard

is proposing that every regulated facility be required to implement a system that provides seafarers, pilots, welfare organizations, labor, agents, surveyors, and others with no-cost access between the vessel and the main gate. According to the Coast Guard, the rule was proposed because “we have received complaints that some facilities comply with (existing regulations) by permitting access to and from vessels, but make shore access impractical for seafarers and other individuals by placing extreme limitations on escort availability or charging exorbitant fees.” The new rule would extend free access requirements to “broad categories (of) individuals such as port worker organizations, port engineers and superintendents, technicians, port

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Reverend Ben Stewart of the Houston International Seafarers Center notes that “we’re constantly talking to facilities, along with the agencies and others, and telling them about the need to be able to get people in and out, but, at this point, their security plans are in place and they’re not going to change them.” He does see a bright spot, however, saying that “the recent notice of proposed rulemaking is a ray of hope for us on the seafarer’s access side, because it’s the hammer that will incentivize the change to the facility security plans filed with the Coast Guard.”

business in the port. Regional stakeholder groups work diligently to ensure that closures are minimized and normal operating practices keep costs down. The Lone Star Harbor Safety Committee, Area Maritime Security Committee, and Central Texas Area Committee meet regularly to advise the Coast Guard’s Captain of the Port on issues affecting safety, security, and the environment. During times of crisis, the Port Coordination Team, a group that represents nearly every private and public entity on the ship channel, will meet to share information and prioritize vessel movements in a show of unparalleled cooperation to get traffic restarted after a closure.

The Port Call Ends

Conclusion

Port calls in Houston can last anywhere from ten hours for a cruise or container ship to sail in, churn cargo, and depart, to over a month as a chemical tanker makes precisely ordered stops across a multitude of terminals. As a vessel readies to depart, the port agent will ensure that cargo filings are completed, the electronic notice of departure has been filed, and the crew lists are updated with CBP. They will also reverse the process of arrival by arranging for line handlers to untie the vessel, tugs to push it out, and a pilot to guide the ship to sea. But the job is not quite over yet: when all is said and done, it is time to reconcile accounts.

While consistent with many other regional ports, a port call in Houston starts at nearly $25,000 for a single voyage can be far more expensive if the schedule outlined in the charter party is not met. Demurrage charges, extra movements, and additional terminal charges add to the cost of doing business, and extenuating circumstances may contribute to the delay if, for example, the vessel needs to be repaired after damage, a crew member must be hospitalized, or hazardous material must be removed from the ship. In addition, external forces, such as fog, channel closures, or regional incidents can cause delays for everyone doing

At the end of the day, moving through the Houston Ship Channel involves a multitude of parties and an unprecedented amount of teamwork. The owners, operators, agents, masters, pilots, seafarers, tugs, terminals, longshoremen, federal agencies, and more work together closely to ensure the safe and reliable flow of commerce through Houston. As Steven Nerheim, the Director of the Houston/ Galveston Vessel Traffic Service, notes, “The Greater Galveston Bay port complex enjoys a very high level of cooperation and coordination between and among federal interagency partners, and across the

22 | March 2015 www.txgulf.org

spectrum of public and private commercial stakeholders. The effective workings of the Lone Star Harbor Safety Committee, the Area Maritime Security Committee, and the Port Coordination Team contribute to the efficient mixed-use of our very busy, nationally-significant waterway.”

According to Nerheim, “long practice, habitual working relationships, and the resulting mutual trust and confidence yield an almost unbelievable level of coordination and a strong problem solving team.”

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The Master of the Madrid Express receives advice from a Houston Pilot on thruster use during a turning maneuver in the Barbours Cut turning basin.

Greater Houston Port Bureau | 23

spotlight

Spotlight on Mark Vincent PHA Director of Channel Development Emily Mitchell, GHPB A native of San Antonio, Mark Vincent, COL. U.S. Army (Ret.), the Port of Houston Authority’s Director of Channel Development, grew up in an Army family dedicated to the old Southwest Conference.

With relatives and in-laws who attended Arkansas, Texas A&M, Baylor, Texas, and Oklahoma, Mark and his family had a spirited, yet friendly, rivalry. However, as Mark says, “At the time, Oklahoma ‘cleaned up,’ which made my mother really happy.” Along with his two brothers, Mark left San Antonio for college and Army careers; he entered the United States Military Academy at West Point to study engineering. He later earned master’s degrees in Civil Engineering and National Security Strategy.

Upon graduating from West Point, Mark commissioned into the U.S. Army Corps of Engineers, served four overseas tours over the course of 27 years, and retired in the rank of colonel. His unique Army career consisted of jobs in the engineering field in addition to military training and education.

In a posting in the Seattle District, Mark was part of a Corps and city construction management team that built a pair of spans similar to the Sam Houston Tollway Ship Channel Bridge in Harris County. He also served as Commander of the Charleston District, where he had responsibilities for the federal channels in South Carolina and oversaw the deepening of the Charleston ship channel. This posting, which provided him with the experience of working on the Corps aspect of channel deepening projects, gave Mark the valuable perspective that he brings to his current position working on the non-Corps side of dredging projects here in Houston.

Mark’s career in the Corps sent him overseas, as well. As the commander of a bridge company in Germany, “We had a

mobile detachment where we could drive our bridge units into the water, put them together, and ferry tanks and equipment, or construct bridges, across German rivers.” He also served in the Middle East during Desert Storm in the early 1990s.

Following the end of the ground war, he and a team of several thousand personnel used GPS-assisted mapping in order to locate and then render unusable any remaining Iraqi equipment. Across a span of over 60,000 square kilometers, “I had 3,000 people out there blowing things up in Iraq. We were blowing up tanks, bunkers, trucks, munitions, and equipment, all of it, to eliminate future military use.” Mark reasons that the project was one of the first instances of GPS-assisted mapping: He and his unit’s 8,000 engineers used around 20 GPS units, flew over an area about three times the size of Houston, and mapped the areas containing Iraqi equipment in order to send engineers back out to find those equipment centers and destroy them.

On the military training and education side, Mark was an assistant professor of civil engineering at West Point, served as Commandant of the Defense Mapping School, and founded the National Imagery and Mapping College in 1996 (of which the Defense Mapping School is now part). The school taught cartography, terrain analysis, and a number of other skills to the U.S. Army, Navy, Air Force, and Marine Corps, along with about 30 foreign U.S. allies. Instructors from the school traveled overseas regularly to implement aeronautical and nautical cartography training programs and certify cartographers in a number of countries, including former Soviet states and satellites such as Lithuania, Estonia, Latvia, Albania, and Hungary.

Mark also had the chance to send the school’s instructors to do the mapping

24 | March 2015 www.txgulf.org

Mark Vincent, PHA Director of Channel Development for the Dayton Accords, the agreement that brought an end to the Bosnian War in 1995. According to Mark, “We packed up portable training equipment and sent Army, Navy, Air Force, and DoD civilians to do the terrain analysis and cartography.

Then we finished the national maps for the new former Yugoslavian countries at the Defense Mapping School in time to deliver the maps the night before” the signing in Paris in December 1995. Following this great success, the powers that be decided to expand the school and later consolidate the satellite imagery training program for the Department of Defense and the CIA into the school. In the end, Mark’s staff included Army, Navy, Air Force, and Marine Corps service members as well as DoD civilians and CIA personnel.

After serving as the major command engineer responsible for facilities, engineering, environment, logistics, and housing for Army installations in Virginia, Maryland, New York, and Washington, D.C., Mark retired from the Army and moved his family back to Texas. As for his decision to retire from the Army after 27 years, Mark explains that “it was the right time.” His wife had also been an “Army brat” growing up and moved to Germany

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Greater Houston Port Bureau | 25

spotlight just prior to her senior year of high school.

When they married, Mark promised his wife that he would not do the same to their own kids. So, with one daughter at the University of Texas at Austin and two rising high school juniors, the Vincent family settled into civilian life in the Houston area. Two of Mark’s daughters played tennis, the other played lacrosse, and all three eventually attended UT. The family’s continuous military service dating back 100 years continues, as his oldest daughter is married to an Air Force officer.

Prior to being hired on at the Port of Houston Authority, Mark worked for a consulting company in Houston that happened to have a contract with PHA. In 2002, he accepted a position with PHA as the Bayport Engineer and he was responsible for building the Bayport Container Terminal. From there, Mark moved on to formalize a construction management system, hiring a number of additional engineers to perform engineering and assist with construction management.

As Mark says, “We had inspectors before here at the Port Authority, but we didn’t have dedicated construction managers.”

Continuing his streak of innovation, Mark then developed the project management system at the Port Authority for all capital projects, hiring a series of project managers to oversee the entire life cycle of projects, “from the planning through the design and then through the construction and handoff.”

Mark has been in his current position as Director of Channel Development since April 2011. Simply put, his department puts the Port Authority’s mission into practice: it facilitates commerce and safe navigation. According to Mark, his department “does things in the water, above the water, and underneath the channel,” including issuing pipeline licenses, marine construction permits, and submerged land leases, managing PHA’s responsibilities as the local sponsor of federal channels, overseeing dredging of PHA terminals, and maintaining the dredge material placement areas.

At the top of Mark’s priorities is the dredging of Bayport Channel and Barbours

Cut currently underway. After the Panama Canal announced in 2006 that it was going to expand, the Port of Houston knew that it needed to prepare itself for the coming changes in the shipping industry. At the time, Bayport and Barbours Cut were still at 40 feet, so “we had facilities that were prepared to handle the bigger ships, but our channel was not.” Moreover, “we realized we didn’t have 20 years to be ready for the Panama Canal.” Therefore, the Port of Houston Authority pushed through an extraordinary process to do the work itself and, as a result, the dredging project is on track to be completed by September 2015 and for the Corps to accept it for maintenance before the next maintenance cycle.

Furthermore, Mark stresses that the Channel Development department is strongly focused on helping to facilitate berth dredging, which is an important and complicated issue for the Houston port community. One of Mark’s goals for his group is to ease the pressure and provide additional flexibility in enabling berth dredging because, “you can dredge channels all you want, but if your berths don’t match the channel depth, then you can’t bring that ship in.” Most importantly, “we can make sure that the maritime highway doesn’t end 200 feet from the berth.”

The Port of Houston Authority, including representatives from Channel Development, makes regular trips to Washington to increase awareness, support,

26 | March 2015 www.txgulf.org

and, most importantly, funding for our port region in order to enable the people in the Houston-Galveston district to do their jobs effectively and continue our port’s legacy of success. Mark helps to ensure that Texas’ congressional delegation, as well as others from outside Texas, understand the importance of Texas as a maritime state and its essential contributions to the nation’s economy. Compared to other regions that require dredging, the Port of Houston is underfunded and, Mark emphasizes, “if we were to lose a foot of depth in our channels, it could cost the economy $280 million a year because of light loading, loss of business in Houston, additional surface transportation costs, and other factors.” Needless to say, “that’s something that the economy just shouldn’t have to bear.”

Finally, when asked what he likes to do in his spare time, Mark laughs and says, “I live in Katy—I inspect the Katy Freeway for hours every day.” Mark tries to enjoy as much time with his family as possible especially now that several family members live nearby, including one brother who spent over 25 years overseas while serving in the Army. He also enjoys a round of golf when the opportunity to play arises.

Otherwise, he has several “pent up hobbies” that he hopes to break out when he finally decides to retire (again)—but those hobbies may have to wait a while.

If you are interested in participating in a spotlight on you or your company, please contact Emily Mitchell at editor@txgulf.org.

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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

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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!!

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Houston Mooring Co.

Coast Guard, CBP

Coast Guard, Customs and Border Protection Honored Emily Mitchell, GHPB Over 150 people gathered at Brady’s Landing on Wednesday, February 4, 2015, to honor and recognize the U.S. Coast Guard and U.S. Customs and Border Protection for their invaluable work at the Port of Houston. Sponsored by Buffalo Marine Service, Houston Pilots, Intercontinental Terminals Company, and Schröder Marine Services, the event highlighted the critical roles these two agencies play in ensuring the safe, effective, and reliable flow of commerce through Houston’s waterways.

Janiece Longoria, Chairman of the Port Commission, served as the master of ceremonies and stressed the importance of vision and partnership in our port’s century of success. She noted that, “when a bold vision is powered by effective partnership, there’s absolutely no limit to what we can do.” The Port of Houston became the economic driver it is today through teamwork and partnership, with two of the most essential partnerships being those with the Coast Guard and CBP. They are critical to the safety of the port and the facilitation of commerce. As Longoria stated at the luncheon, “it’s not an overstatement to say that without them, we could not function.”

The luncheon recognized the missions of the two agencies as well as specific partnership arrangements they have entered into with the Port of Houston.

Nationally, the U.S. Coast Guard ensures the safety, security, and stewardship of U.S. waterways, with 11 official stated missions.

Locally, the Coast Guard “[does] them all except icebreaking,” Longoria pointed out during her speech. The Port of Houston works closely with the Coast Guard on a daily basis, with the two entities partnering

Janiece Longoria, Chairman of the Port Commission, presents RADM Kevin Cook (L) and CBP Houston/Galveston Port Director Dave Fluty (R) with awards with the following inscription: “In honor of 100 years of protecting the Houston Ship Channel, our nation’s foremost economic engine, thank you for your service. February 4, 2015.” on facility security plans, accident response and investigation, and more. Furthermore, the Coast Guard’s vessel traffic service is key in facilitating ship movements. At the port, “nothing moves without them.”

U.S. Customs and Border Protection serves as the guardian of the nation’s borders, a directive that includes protecting critical port infrastructure. CBP personnel safeguard the U.S. from potential threats while fostering lawful international trade and travel, ensuring our economic security.

At the Port of Houston, CBP processes 6,000 passengers every weekend during cruise season at the Bayport Cruise Terminal, helps to provide late gates and weekend service at the container terminals, and inspects containers to guarantee the health and safety of the population. Moreover, Longoria said, “they carry out this service for the American public every day with vigilance, integrity,

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professionalism, and respect.”

Emphasizing that “we are grateful to both Coast Guard and Customs and Border Protection for their dedication to our waterway,” and thanking them for “[ensuring] that our port continues to prosper,” Longoria brought RADM Kevin Cook, Commander of the 8th Coast Guard District, and Dave Fluty, Houston/ Galveston Area Port Director for CBP, up to the stage to accept the awards of recognition presented by the event’s sponsors.

RADM Cook thanked everyone in attendance, saying, “We all feel in the Coast Guard that we are helping to deliver safety…That legacy, as far back as we can stretch it, I think all members of the Coast Guard are so proud of their service here.”

He talked about visiting several Houstonarea maritime high schools and San Jacinto College earlier in the day, and noted the

Coast Guard, CBP high degree of Coast Guard involvement in these local programs. Along with increasing awareness among high school and junior college students, Coast Guard participation “speaks volumes to how much we’re going to be able to contribute to the next century of success here in Houston.”

In his acceptance, Director Fluty recognized that the two agencies serve “our nation with extraordinary dedication and commitment and, in many cases, enormous courage and sacrifice.” Not only does CBP guard our nation’s borders, its members

secure trade, protect the economy, safeguard the food supply, interdict illegal drugs, and enforce the nation’s laws. CBP helps ensure the nation’s prosperity through “a consistent, stable, and predictable environment for commerce.” Through partnership, Director Fluty said, the Port of Houston, the U.S. Coast Guard, and U.S. Customs and Border Protection can continue their storied legacy of success. As members of the community, “I’m extremely confident that we will continue to meet the challenges ahead, and our collective goal of

fostering this foundation and the continued economic prosperity that the Houston seaport provides our community.”

In closing, Chairman Longoria once again thanked the U.S. Coast Guard and U.S. Customs and Border Protection for their vital service to the port and the surrounding community, and thanked those present for showing their support. Through dedication, vision, and partnership, she said, “we can make the second century more remarkable than the first.”

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Thank you to the event sponsors

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Commerce Club

Commerce Club Luncheon February 2015

Featuring Peter Fasullo, Principal and Co-Founder, En*Vantage, Inc. Judith Schultz, GHPB

Peter Fasullo addresses attendees at the February 12th Commerce Club luncheon.

Peter Fasullo, principal and co-founder of Houston-area energy investment and advisory firm En*Vantage, Inc., discussed the impact of low oil prices on hydrocarbon exports with over 160 attendees at the February 12, 2015, Commerce Club gathering at Brady’s Landing.

“If history is a guide, when oil prices have collapsed by over 50%, six months later prices were 50% to 90% higher,” explained Fasullo as he introduced his presentation to the group. He attributes the sudden collapse in oil prices to the inability of “global demand growth to keep pace with oil production growth, predominantly driven by U.S. shales.” His analysis estimates the global imbalance in supply and demand to be approximately 1.5 to 2 million barrels per day in a market of about 92 million barrels per day. He also feels the market has lost its fear that supply disruptions can occur in unstable oil producing regions.

“Shale,” said Fasullo, “has had a tremendous impact on oil and gas production and has helped to make the U.S. presently well-supplied with oil and gas reserves.” At currently figured demand levels in the United States, Fasullo estimates that U.S. oil and gas reserves will cover up to 37 years of oil demand and 90 years of gas demand.

Although Fasullo believes that the U.S. shale plays represent “a long-term and secure resource that will not evaporate because of low oil prices,” the collapse in prices is a peril to hydrocarbon exports, especially along the Gulf Coast.

The price spread in hydrocarbon exports has been beneficial to the energy sector, particularly in rich gases associated with the production of ethane and propane. The reduction in this spread caused by the price drop has a direct, bottom-line impact on the cost effectiveness and profitability of hydrocarbon production and exports. At

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present, Fasullo assesses that hydrocarbon exports such as propane are at near breakeven levels on the Houston Ship Channel.

However, Fasullo does think that the infrastructure already in place will help the Gulf Coast maintain a strong position over its competitors. He calculates that $100 billion has been invested in midstream assets such as pipelines, storage facilities, NGL fractionators, condensate splitters, and export terminals since 2012, with another $70 billion budgeted through the end of 2016. Many of these assets serve the Gulf Coast and export markets, with numerous facilities situated in the Greater Houston area.

Few oil producing countries can claim similar infrastructure to compete with the U.S. with regard to hydrocarbon production efficiencies. Fasullo also counts the political and economic instability of many oil producing countries as significant factors preventing their competitive ability to withstand low crude prices.

These circumstances should sustain U.S. hydrocarbon exports until the surplus is eliminated and the price begins to rise again, leading to improved profit margins.

In closing, Fasullo stated, “Our ‘crystal ball’ indicates that, by year end 2015, oil prices could be between $60 and $80 [per barrel], and between $80 and $100 in 2016.”

The next Commerce Club luncheon will be held on Thursday, March 12, 2015. Individual seats and table sponsorships are available. Sign up by visiting www.txgulf.org/commerceclub. php or calling 713-678-4300.

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Commerce club

Clockwise from top left: Peter Fasullo shares a business card with an attendee; Capt. Mike Morris; PHA Chairman Janiece Longoria; U.S. Coast Guard CAPT Brian Penoyer and John Taylor; attendees of the February 2015 Commerce Club.

Thank you to our table sponsors

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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